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Financial Development And Economic Growth In Latin America: Schumpeter Is Right!

Date Added: Jun 2010
Format: PDF

In this paper the authors investigate the role of financial development, or more wide-spread access to finance, in generating economic growth in four Latin American countries between 1980 and 2007. The results, based on the relatively novel panel time-series analysis, confirm the Schumpeterian prediction which suggests that finance authorises the entrepreneur to invest in productive activities, and therefore to promote economic growth. Furthermore, given the characteristics of the sample of countries chosen, they also highlight the importance of macro-economic stability, and the entire institutional framework that it encompasses, as a necessary condition for financial development, and consequently for growth and prosperity in the region.