Financial deepening in economic development

by Edward Stone Shaw

By financial deepening the author means the accumulation of financial assets at a faster pace than accumulation of nonfinancial wealth. The theme of the volume, in contrast of dominant traditions in development theory, is that the financial sector of an economy does matter in economic development, assisting accelerated growth, or if repressed, intercepting impulses to development. The author maintains the relative price counts in economic development and that financial liberalization invariably aids development. The book's target is the "lagging economy," which, Professor Shaw writes, "confines itself and international economic policy that, in effect, instruct market participants to keep aggregate levels of income and wealth where they are ... It resists liberalization of market where decentralized decisions could advance economic welfare, even though its government sector is inept. The lagging economy is stubbornly poor." Professor Shaw stresses the importance of decentralization of e