This course reviews a variety of analytical models that analyze the role of money and financial intermediation in economic growth. It investigates the link between saving (and investment) and economic growth, and between development of the financial system and growth. Particular attention is paid to the possible direction of causation between finance and growth. Finally, the course reviews the empirical literature and the evidence that it provides about causal links.

A 2-hour lecture each week for 10 weeks

The main aims of the course are to:

■ analyse the role of money and financial intermediation for economic growth;

■ assess the causal relation between financial development and growth;

■ address the influence of financial structure on economic growth and development;

■ evaluate the strength of the theoretical foundation for the policies of financial repression, financial liberalisation (domestic as well external), and financial development;

■ assess the extent to which policies towards the financial sector should vary depending on a country's stage of development.

By the end of this course students will be able to:

1. Understand both theories and empirical evidence concerning the relationship between finance and growth;

2. Understand, discuss and evaluate the functions performed by financial systems;

3. Appreciate the different implications for policy from seeing growth as being constrained by savings or investment;

4. Examine critically the rationale for financial repression and for financial liberalisation;

5. Discuss the extent to which banking and stock market development can contribute to economic growth and development.

Students must submit at least 75% by weight of the components (including examinations) of the course's summative assessment.