http://repub.eur.nl/res/aut/8784/ List of Publications en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/6651/ 2004-04-08T00:00:00Z 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 liberalization in a period of widespread government intervention in credit markets. After that a period of criticism of free market regimes followed, partly based on unsuccessful policies. The literature on financial development and endogenous growth pushed the discussion back into the direction initially advocated by McKinnon and Shaw. We review a huge body of empirical literature, which generally finds positive associations between domestic financial development and economic growth. The evidence suggests, however, enormous heterogeneity across countries, regions, financial factors, and directions of causality. http://repub.eur.nl/res/pub/6796/ 2002-09-17T00:00:00Z We explore dynamic linkages between financial/banking sector openness, financial sector competition, and growth. We first develop an analytical model, highlighting links between long-run economic performance and services trade, through scale economies and market and cost structures in the financial services sector. This is folIowed by an econometric exercise based on data for 130 countries for the 1990s. Our resu1ts point to a strong positive relationship between financia1 sector competition/performance and financia1 sector openness (meaning foreign bank access to domestic markets), and between growth and financial sector competition/performance. They also point to the presence of sca1e economies in the sector.