This paper reviews the theoretical and empirical literature on links between domestic financial development and economic growth. It starts with the pioneers in this field and then classifies two main schools favouring liberal financial regimes. First McKinnon and Shaw advocated financial...

While financial liberalization has in general favorable effects, reforms in countries with poor regulation is often followed by financial crises. We explain this variation as the outcome of lobbying interests capturing the reform process. Even after liberalization, market investors must rely on...

Lack of transparency increases the probability of a banking crisis following financial liberalization. In a country where government policy is not transparent, banks may tend to increase credit above the optimal level. - Mehrez and Kaufmann investigate how transparency affects the probability of...