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The Impact of Financial Intermediaries on Resource Allocation and Economic Growth

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  • Philip Lowe

    (Reserve Bank of Australia)

Abstract

This paper examines the links between economic growth and the nature of a country’s financial system. It is argued that long-run growth has its roots in resource accumulation, and in particular in knowledge accumulation. The financial system plays an important role in influencing both the amount and type of resource accumulation which actually takes place. In particular, financial market regulation distorts the incentives of financial intermediaries which, in turn, distorts the type of resource accumulation that takes place. It is also argued that the size of the gains derived from the development of the financial sector rests heavily on the ability of intermediaries to effectively screen and monitor lending proposals. Finally, the paper explores some of the implications of Australia’s financial market liberalisation.

Suggested Citation

  • Philip Lowe, 1992. "The Impact of Financial Intermediaries on Resource Allocation and Economic Growth," RBA Research Discussion Papers rdp9213, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp9213
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    References listed on IDEAS

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    12. repec:ucp:bkecon:9780226301532 is not listed on IDEAS
    13. Jerome Fahrer & Thomas Rohling, 1992. "Some Tests of Competition in the Australian Housing Loan Market," RBA Research Discussion Papers rdp9202, Reserve Bank of Australia.
    14. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 393-414.
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    Cited by:

    1. Joseph Bisignano, 1999. "Precarious credit equilibria: reflections on the Asian financial crisis," BIS Working Papers 64, Bank for International Settlements.
    2. Adam Cagliarini & Fiona Price, 2017. "Exploring the Link between the Macroeconomic and Financial Cycles," RBA Annual Conference Volume (Discontinued), in: Jonathan Hambur & John Simon (ed.),Monetary Policy and Financial Stability in a World of Low Interest Rates, Reserve Bank of Australia.
    3. Wright, April, 2002. "The impact of competition on the operations of foreign banks in Australia in the post-deregulation period," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 12(4-5), pages 359-375.

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