ABSTRACT
This chapter discusses the development of a modern economy is possible with reference to the evolution of its financial system which undergoes a modernization process similar to that of real side of the economy. The account of the long-term evolution of Italy's financial intermediation system is based upon the work of Raymond Goldsmith, in which the performance of the main financial variables is studied with an approach and methods not that dissimilar to Kuznets'. According to Goldsmith, the relation between a country's financial superstructure and its real infrastructure is reflected in the financial interrelation ratio (FIR). In the course of modern economic growth the financial superstructure grows more rapidly than the structure constituted by real income and wealth. Real growth is usually accompanied by a growing specialization and separation of the savings and investment processes. This is reflected in an increase in the issues by non-financial sectors, of foreign issues and of issues of financial institutions to gross national product.
