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In this paper interactions between finance, development and armed conflict are explored to demonstrate that financial factors are crucial in sustaining conflict-underdevelopment feedback loops. Military expenditure drains resources, financial instability leads to conflict (and vice versa), war retards the development of financial institutions/infrastructure, and interactions between finance and conflict are exacerbated by distributional struggles. Some of these feedback effects are captured within a two-stage model of war, finance and development and this is used as the basis for an empirical analysis.
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