Working Paper: CEPR ID: DP1160
Authors: Gilles Saint-Paul
Abstract: The historical record suggests that economic development is associated with the rise of the financial sector. This rise is often triggered by exogenous events such as large budget deficits generated by wars or the availability of large investment projects such as railroads. This paper discusses the role played by such demand factors in financial development and how they favour growth.
Keywords: financial markets; economic growth; deficits; privatization; saving; crowding out
JEL Codes: O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| public debt (H63) | physical investment (G31) |
| public debt (H63) | economic growth (O49) |
| physical investment (G31) | economic growth (O49) |
| large investment projects (G31) | financial development (O16) |
| privatization (L33) | financial development (O16) |
| public debt (H63) | shift from low-finance equilibrium to high-finance equilibrium (D53) |