ABSTRACT
That financial development is important for growth and capital accumulation is now well recognized. A better financial market makes the allocation of savings to investment more efficient and may increase savings if it is positively correlated with their returns. Empirical evidence on the impact of financial development on real activity is reasonably robust and convincing (Goldsmith, 1969; McKinnon, 1973; Fry, 1988, 1993; King and Levine, 1993).
