Financial Markets play an important role in economic development, channeling saving to investments and facilitating growth. In Eastern Europe financial markets were initially much underdeveloped, and lacked the skills and infrastructure they needed to be efficient, having not acquired them in...

I review selectively some of the trends in research on the relationships between financial markets and economic growth. Economic theory provides many arguments as to why, given the widespread existence of moral hazard and adverse selection problems in financial transactions, more highly...