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Title: Evolution of the financial sector – three different stages: repression, development and financialisation
Authors: Barradas, R.
Keywords: Financial repression
Financial liberalisation and Deregulation
Financial development
Excessive financial deepening
Issue Date: 2015
Series/Report no.: Working Papers
Abstract: This paper makes a systematic literature review on the evolution of the financial sector in the last decades all over the world, but especially in the more developed countries. This evolution was marked by three different stages, reflecting different impacts of the financial sector on the real economy and on society. The first stage – financial repression – is characterised by the existence of several regulations and restrictions on the financial sector, which proved to be detrimental to support economic growth. This legitimised the financial liberalisation and deregulation of the financial sector in the recent years, representing the second stage – financial development. Consequently, there was a strong growth of the financial sector in subsequent years, originating an excessive financial deepening and casting doubts around the advantages provided by the financial sector. In fact, excessive financial deepening weakened or reversed the relationship between savings and investments. The large growth of the financial sector and its deleterious effects are commonly referred as financialisation, constituting the third stage. The paper concludes that it is necessary to engage in a fourth stage in the coming years – de-financialisation – in order to re-establish a more supportive relationship between the financial sector and economic growth and presents several policy recommendations around this matter.
Peer reviewed: Sim
Appears in Collections:DINÂMIA'CET-WP - Working papers com arbitragem científica

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