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Financial Structure and Economic Growth: A Cross-Country Comparison of Banks, Markets, and Development
Edited by Alsi Demirguc-Kunt and Ross Levine. 2002. Cambridge, MA and London, England: The MIT Press. Pp. 444. $45.00 hardcover with CD-ROM.
Raymond W. Goldsmith's 1969 book, Financial Structure and Development, had three objectives: to document how financial structure changes as economies grow, to assess the impact of financial development on economic growth, and to evaluate whether financial structure influences the pace of economic growth. Goldsmith was successful in documenting the evolution of national financial systems, especially the evolution of financial intermediaries. However, lack of statistical evidence hampered drawing conclusions to answer the other two questions.
The book under review adds considerable empirical evidence to answer Goldsmith's three questions. The first part of the book updates Goldsmith's documentation of the evolution of financial structure during the process of economic growth. The cross-country dataset that accompanies the book is then used to address the relationship between economic growth and the level of financial development and the structure of the financial system. Finally, a collection of detailed country studies examines the relationship between economic development and financial structure.
The editors, who also contributed substantially...