ABSTRACT
Ever since Shaw and McKinnon published their path-breaking works on financial development in 1973, there has been extensive research on the effects of monetary and financial policies on the economic growth of developing countries. Focussing on misguided policies and microeconomic distortions, the ensuing literature failed to analyze monetary development as a more farreaching process of setting up a coherent macroeconomy. And it downplayed the difficulties of newly independent countries to do so in a world of established currency areas.
