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Financial Development, Financial Instability and Poverty

By Sylviane Guillaumont Jeanneney, Kangni Kpodar, Corresponding Sylviane and Guillaumont Jeanneney


The authors are grateful to the participants in the sixth conference of the Economic Analysis and Development Network (Marrakech, March 2004), for useful comments. In addition, the authors would like to thank the participants in the congress of the Canadian Economic Sciences Society (La Malbaie, May 2005) for helpful discussions. 1 Financial Development, Financial Instability and Poverty Summary: This article investigates how financial development is beneficial to the reduction of poverty, on the one hand by promoting growth and in the other hand directly by the McKinnon conduit effect. At the same time, however, financial instability which accompanies financial development is detrimental to the poor and dampens the positive effect of financial development on the reduction of poverty. These hypotheses are tested successfully on a sample of developing countries over the period 1966-2000, resulting in straightforward policy implications. JEL G0, O15, O1

Year: 2005
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