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

32 Pages Posted: 15 Feb 2006

See all articles by R. Barry Johnston

R. Barry Johnston

International Monetary Fund (IMF)

Ceyla Pazarbasioglu

International Monetary Fund (IMF) - International Capital Markets Department

Date Written: October 1995

Abstract

This paper analyzes the different channels through which financial variables and financial sector reform can affect economic growth and efficiency, using panel data for 40 countries which reformed their financial systems. Financial sector reform is hypothesized to affect economic growth and efficiency through three main channels: the real interest rate representing the interest cost of capital, the volume of intermediation, and financial sector efficiency. The results indicate that financial reforms have structural effects; that financial variables and reforms are important determinants of economic performance; that the impact depends on whether countries did or did not face a financial crisis; and that the "quality" of financial sector reform matters.

JEL Classification: E10, E44, E60, G21, G28

Suggested Citation

Johnston, R. Barry and Pazarbasioglu, Ceyla, Linkages between Financial Variables, Financial Sector Reform and Economic Growth and Efficiency (October 1995). IMF Working Paper No. 95/103, Available at SSRN: https://ssrn.com/abstract=883250

R. Barry Johnston (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Ceyla Pazarbasioglu

International Monetary Fund (IMF) - International Capital Markets Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-5967 (Phone)
202-589-5967 (Fax)

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