Financial Development and Economic Growth

Abstract

This article provides a review of international literature on the linkages between financial system development and growth of economic activity. The role provided by financial intermediaries and the impact that their actions provides in mitigating market frictions both in relation to the design of incentives to reduce restrictions economic agents, affecting the rates of investment and savings, technological innovation and, hence, economic growth in the long term. As a result, the financial markets offer investors information, each agent used to estimate the profitability of the projects, as diversified risk factor, reducing the liquidity constraints. These contributions positively affect economic growth.