Abstract
Most early development economists neglected the financial aspects of development, often restricting them to domestic taxation, the self-finance of enterprises and the negotiation of foreign credits. In the 1970s, a few economists proposed that private financial intermediation, operating with market-set interest rates, improved incentives to save and the availability of credit, and allocated savings more efficiently between borrowers. Against this, new institutional economists have argued that financial intermediation involves considerable risks since banks find it difficult to acquire skills in risk assessment. The relationship between increases in real income and the size and complexity of the financial superstructure remains loose.
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Toye, J. (2018). Financial Structure and Economic Development. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_1965
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DOI: https://doi.org/10.1057/978-1-349-95189-5_1965
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