Financial development and economic growth: Known knowns, known unknowns, and unknown unknowns

Article, Research English OPEN
Panizza, Ugo (2013)
  • Publisher: Graduate Institute of International and Development Studies Geneva
  • Journal: volume 22, issue HS02, pages 35-65
  • Subject: Welt | Wirtschaftswachstum | Finanzsektor | Wirkungsanalyse | Systemvergleich
    • ddc: ddc:330

This paper summarises the main findings of the literature on the relationship between financial and economic development (the known knowns), points to directions for future research (the known unknowns), and then speculates on the third Rumsfeldian category. The known knowns section organises the empirical literature on finance and growth into three strands: (i) the traditional literature which established the link between finance and growth; (ii) the new literature which qualified some of the results of the traditional literature; and (iii) the new-new literature which focuses on alternative measures of financial development and on the dark side of finance. The known unknowns section focuses on causality, on the channels through which finance affects growth, and on the dark side of finance. The unknown unknowns section discusses a topic on which we may know less than what we think we know.
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