Financial systems and economic growth: An evaluation framework for policy
New Zealand Treasury Working Paper 04/17
Published: September 2004
Authors: Iris Claus, Veronica Jacobsen and Brock Jera
Abstract
The purpose of this paper is to develop an analytical framework for discussing the link between financial systems and economic growth. Financial systems help overcome an information asymmetry between borrowers and lenders. If they do not function well, economic growth will be negatively affected. Three policy implications follow. First, the analysis underscores the importance of maintaining solid legal foundations because the financial system relies on these. Second, it demonstrates the necessity for reforming tax policy as it applies to investment, as this is demonstrated to significantly affect the operation of the financial system. Finally, given the importance of financial development for economic growth, a more in-depth review of New Zealand’s financial system in the context of financial regulation and supervision would be valuable.
Table of Contents
Acknowledgements
We would like to thank Rienk Asscher, Felicity Barker, Matt Benge, John Bryant, David Carrigan, John Creedy, Nick Davis, Kerryn Fowlie, Ruth Gabbitas, Arthur Grimes, Kirstie Hewlett, Geoff Lewis, Brian McCulloch, Andrew McLoughlin, Duncan Mills, Brendon Riches, Clive Thorp, Bruce White and Ian Woolford for useful comments at various draft stages. Thank you to Bronwyn Croxson for her editorial work. Thanks are also due to Anand Kochunny and Raewyn Peters for research assistance.
Disclaimer
The views, opinions, findings, and conclusions or recommendations expressed in this paper are strictly those of the authors. They do not necessarily reflect the views of the New Zealand Treasury. The New Zealand Treasury takes no responsibility for any errors or omissions in, or for the correctness of, the information contained in this paper. The paper is presented not as policy, but to inform and stimulate wider debate.
