Financial Development, Macroeconomic Policies and Economic Performance

The relationship between financial development and economic growth is important and intriguing at the same time. On the one hand, the empirical growth literature finds a positive effect of financial depth as measured by, for instance, private domestic credit and liquid liabilities (e.g., Levine, Loayza, and Beck 2000). On the other hand, the banking and currency crisis literature finds that monetary aggregates, such as domestic credit, are among the best predictors of crises and their related economic downturns (e.g. Loayza and Ranciere, 2006).

In this seminar, Jingzhu Chen, MPhil candidate, will explore the nature of the relationship between financial development and eco- nomic growth, and especially consider whether it may in fact be non-monotonic. Moreover, she will innovatively introduce macroprudential policies which aims to promote financial stability, and investigate their influence on the growth effects of financial institutions.