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Finance and growth: theory

Many thanks to Guglielmo Volpe for all his work in initiating this page. Last updated January 2000. See also the references on finance and growth: evidence and stock markets and growth. For a more up-to-date set of references, see Yongfu Huang’s Financial Development Resources


Gertler, Mark (1988). Financial structure and aggregate economic activity: an overview. Journal of Money, Credit, and Banking, 20, 559-588.

Levine, Ross (1997). Financial development and economic growth: views and agenda. Journal of Economic Literature, 35, 688-726.

Pagano, M. (1993). Financial markets and growth: an overview. European Economic Review, 37, 613-622.

Borrowing constraints and growth

Bencivenga, V. R. and Smith, B. D. (1993). Some consequences of credit rationing in an endogenous growth model. Journal of Economic Dynamics and Control, 17, 97-122.

Betts, Caroline and Bhattacharya, Joydeep (1998). Unemployment, credit rationing, and capital accumulation: a tale of two frictions. Economic Theory, 12(3), 489-518.

Bose, N. and Cothren, R. (1996). Equilibrium loan contracts and endogenous growth in the presence of asymmetric information, Journal of Monetary Economics, 38, 363-376.

Buiter, W. H. and Kletzer, K. M. (1995). Capital mobility, fiscal policy, and growth under self-financing of human capital formation. Canadian Journal of Economics, 28, S163-S194.

De Gregorio, J. (1996). Borrowing constraints, human capital accumulation and growth. Journal of Monetary Economics, 37, 49-71.

Japelli, T. and Pagano, M. (1994). Saving, growth, and liquidity constraints. Quarterly Journal of Economics, 108, 83-109.

Ma, C.-H. and Smith, B. D. (1996). Credit market imperfections and economic development: theory and evidence. Journal of Development Economics, 48, 351-387.

Shi, S. (1996). Asymmetric information, credit rationing and economic growth. Canadian Journal of Economics, 29, 665-687.

Tsiddon, D. (1992). A moral hazard trap to growth. International Economic Review, 33, 299-321.

Risk management

Bencivenga, V. R. and Smith, B. D. (1991). Financial intermediation and endogenous growth. Review of Economic Studies, 58, 195-209.

Bencivenga, V. R., Smith, B. D. and Starr, R. M. (1995). Transaction costs, technological choice and endogenous growth. Journal of Economic Theory, 67, 153-177.

Bencivenga, V. R., Smith, B. D. and Starr, R. M. (1996). Equity markets, transactions costs and capital accumulation: an illustration. World Bank Economic Review, 10, 241-265.

Devereux, M. B. and Smith, G. W. (1994). International risk sharing and economic growth. International Economic Review, 35, 535-550.

Obstfeld, M. (1994). Risk-taking, global diversification, and growth. American Economic Review, 84, 1310-1329.

Information acquisition and resource allocation

Greenwood, J. and Jovanovic, B. (1990). Financial development, growth, and the distribution of income. Journal of Political Economy, 98, 1076-1107.

King, R. G. and Levine, R. (1993). Finance, entrepreneurship and growth: theory and evidence. Journal of Monetary Economics, 32, 513-542.

Monitoring managers and exerting corporate control

Blackburn, K. and Hung, V. T. Y. (1998). A theory of growth, financial development and trade. Economica, 65, 107-124.

de la Fuente, A., and Marin, J. M. (1996). Innovation, bank monitoring and endogenous financial development. Journal of Monetary Economics, 38, 269-301.

Savings mobilization

Acemoglu, D. and Zilibotti, F. (1997). Was Prometheus unbound by chance? Risk, diversification and growth. Journal of Political Economy, 105, 709-751.

Exchange and specialisation

Boyd, J. and Smith, B. D. (1996). The coevolution of the real and financial sectors in the growth process. World Bank Economic Review, 10, 371-396.

Greenwood, J. and Smith, B. D. (1997). Financial markets in development, and the development of financial markets. Journal of Economic Dynamics and Control, 21, 145-181.

Saint-Paul, G. (1992). Technological choice, financial markets and economic development. European Economic Review, 36, 763-781.

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