infonet-economy

This paper reviews the empirical literature on the links between finance and growth with a special focus on the empirical literature that has shown that the marginal contribution of financial depth to economic growth becomes negative in countries with large financial sectors (the "too much finance result"). It then assesses the empirical and theoretical validity of recent criticisms to this literature and concludes by discussing avenues for future research aimed at identifying the channels through which a very large financial sector can slow down economic growth.