Instructions
Please write your answer in an essay of no more than 2,500 words. Your assignment should be
submitted via email on the last day of the term.
This assignment draws mainly on information from lecture 4, however a grasp of the information
from previous lectures is useful in broadening your understanding of the topic. A good answer
will demonstrate your understanding of the principles involved and your ability to assess
evidence – for example, evidence on the relationship between financial development and growth
and what are some of the challenges with the financial system in developing countries that
stymie the growth process. Please ensure that your assignment is properly referenced.
Question
a) Is there theoretical and empirical evidence to support the relationship between financial
development and economic growth outlined in the literature?
b) Use theoretical and empirical evidence where necessary to assess the veracity of the
statement that “ the institutional environment of a poor legal system, weak accounting
standards, inadequate government regulation, and government intervention through directed
credit programs and state ownership of banks all help explain why many countries stay poor
while others, unhindered by these impediments, grow richer”. 1
1 Please read the case ”Financial Development and Economic Growth” on page 194 of your textbook Mishkin
(2018) for a more detailed discussion of the point raised in part (b) of the question