Alexander Hamilton argued in 1781 that "banks were the happiest engines that were ever invented"for spurring economic growth. Others disagree. President John Adams argued in 1819 that banks harm the "morality, tranquility and even wealth" of nations. Theoretical models also provide conflicting answers to the question whether financial intermediaries and markets foster or stymie economic growth, While previous research has shown an empirical relation between financial development and subsequent economic growth, this line of research assesses empirically whether financial development has a causal impact on economic development. This includes cross-country, firm-level studies and country studies. This research also analyzes whether financial intermediaries increase economic growth through better resource allocation and higher productivity growth or through faster capital accumulation. This is an important not just for academics interested in the determinants of economic development, but also for policy makers interested in fostering economic development.
Having established a causal impact of both financial intermediaries and financial markets, the discussion has recently turned to the determinants of an efficient and vibrant financial sector. Our research has focused both on specific policies as well as the historic determinants of financial development. Legal system efficiency is often named as one of the keys to a well-developed financial system, and our research tries to understand both the relation between legal traditions and financial development as well as the mechanisms of this relation.
This database of Indicators of Financial Development and Structure across countries and over time is unique in that it unites a range of indicators that measure the size, activity and efficiency of banks, non-banks financial institutions and capital markets. Data are available for over 100 countries and for the period 1960-2003. The database is being regularly updated.
Policy Research Working Papers
For more policy research working papers from the World Bank's institutional archives, search here using author’s last name, title or working paper number (“wpsxxxx”).
|WPS4967||Finance and inequality : theory and evidence||Demirguc-Kunt, Asli; Levine, Ross||2009/06|
|WPS4608||The econometrics of finance and growth||Beck, Thorsten||2008/04|
|WPS4538||License to sell : the effect of business registration reform on entrepreneurial activity in Mexico||Bruhn, Miriam||2008/02|
|WPS3955||Finance and economic development : policy choices for developing countries||Demirguc-Kunt, Asli||2006/06|
|WPS3940||What determines protection of property rights ? An analysis of direct and indirect effects||Ayyagari, Meghana; Demirguc-Kunt, Asli; Maksimovic, Vojislav||2006/06|
|WPS3709||How well do institutional theories explain firms' perceptions of property rights?||Ayyagari, Meghana; Demirguc-Kunt, Asli; Maksimovic, Vojislav||2005/09|
|WPS3657||Institution building and growth in transition economies||Beck, Thorsten; Laeven, Luc||2005/07|
|WPS3485||Finance, firm size, and growth||Beck, Thorsten; Demirguc-Kunt, Asli; Laeven, Luc; Levine, Ross||2005/01|
|WPS3194||Law and firms' access to finance||Beck, Thorsten; Demirguc-Kunt, Asli; Levine, Ross||2004/01|
|WPS3136||Legal institutions and financial development||Thorsten Beck; Ross Levine||2003/09|
|WPS3105||Further evidence on the link between finance and growth : an international analysis of community banking and economic performance||Berger, Allen N; Hasan, Iftekhar; Klapper, Leora F.||2003/08|
|WPS2904||Law and finance : why does legal origin matter?||Beck, Thorsten; Demirguc-Kunt, Asli; Levine, Ross||2002/10|
|WPS2608||Financial development and international trade : is there a link?||Beck, Thorsten||2001/05|
|WPS2609||Financial dependence and international trade||Beck, Thorsten||2001/05|
|WPS2382||Impediments to the development and efficiency of financial intermediation in Brazil||Beck, Thorsten||2000/06|
|WPS2057||Finance and the sources of growth||Beck, Thorsten; Levine, Ross; Loayza, Norman||1999/02|
|WPS2059||Financial intermediation and growth : Causality and causes||Levine, Ross; Loayza, Norman; Beck, Thorsten||1999/02|
|WPS1690||Stock markets, banks, and economic growth||Levine, Ross; Zervos, Sara||1996/12|