The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Financial Structure and Economic Development

  • John Toye
Reference work entry


Most early development economists neglected the financial aspects of development, often restricting them to domestic taxation, the self-finance of enterprises and the negotiation of foreign credits. In the 1970s, a few economists proposed that private financial intermediation, operating with market-set interest rates, improved incentives to save and the availability of credit, and allocated savings more efficiently between borrowers. Against this, new institutional economists have argued that financial intermediation involves considerable risks since banks find it difficult to acquire skills in risk assessment. The relationship between increases in real income and the size and complexity of the financial superstructure remains loose.


Adverse selection Asymmetric information Capital controls Credit rationing Development banks Financial intermediaries Financial intermediation Financial interrelations ratio Financial liberalization Financial repression Financial structure and economic development Goldsmith, R. Interest-rate liberalization Kalecki, M. Microcredit Moneylenders in developing countries Moral hazard New institutional economists Prudential regulation Reserve ratio requirement Risk assessment 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • John Toye
    • 1
  1. 1.