The financial system and economic growth in the context of political transition

Abstract

This paper examines the roles of banks in economic recovery and political transition. After the introduction, section II articulates how finance promotes growth; section II examines how economic growth in turn enhances the development of the financial system. Discussions of how finance and growth relate to and enhance each other typically assume the existence of a stable political arrangement that provides an enabling environment. Section V offers some thoughts on the linkages between finance and growth when the political environment is impaired. Some policy implications of this are discussed in the concluding section of this paper.