Financial development and economic growth: A review.


Chee-Keong Choong* and Sok-Gee Chan

The relationship between financial development and economic growth has been subject to the considerable debate in the literature of development and growth. While empirical studies often provide a direct relationship between financial development proxies and growth, much controversy remains about how these results should be interpreted. The study, therefore, discusses four main sources of controversy, namely: the selection and measurement of financial development indicators, the causality direction of the financial development and economic growth, the use of empirical approaches to the finance-growth hypothesis, and the debate concerning the channels by which financial development promotes economic growth.

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