Linkages Between Financial Variables, Financial Sector Reform and Economic Growth and Efficiency

IMF Working Papers, October 1, 1995

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Linkages Between Financial Variables, Financial Sector Reform and Economic Growth and Efficiency

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Bibliographic details

• Authors: R. B. Johnston, Ceyla Pazarbasioglu
• Published: October 1, 1995
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451948110.001

Summary and Research Scope

• Analyzes channels through which financial variables and financial sector reform affect economic growth and efficiency.
• Uses panel data for 40 countries which reformed their financial systems.
• Hypothesized transmission channels:
  • The real interest rate representing the interest cost of capital.
  • The volume of intermediation.
  • Financial sector efficiency.

Key Findings

• Financial reforms have structural effects on economies.
• Financial variables and reforms are important determinants of economic performance.
• The impact of financial reforms depends on whether countries did or did not face a financial crisis.
• The “quality” of financial sector reform matters for outcomes.

Subjects and Keywords

• Subject: Commercial banks, Financial crises, Financial sector development, Financial sector reform, Real interest rates
• Keywords: crisis, crisis country, economic growth, efficiency, real interest rate, WP