Financial Development and Poverty Reduction: Can There Be a Benefit Without a Cost?

Sylviane Guillaumont Jeanneney and Kangni Kpodar

No 2008/062, IMF Working Papers from International Monetary Fund

Abstract: This article investigates how financial development helps to reduce poverty directly through the McKinnon conduit effect and indirectly through economic growth. The results obtained with data for a sample of developing countries from 1966 through 2000 suggest that the poor benefit from the ability of the banking system to facilitate transactions and provide savings opportunities but to some extent fail to reap the benefit from greater availability of credit. Moreover, financial development is accompanied by financial instability, which is detrimental to the poor. Nevertheless, the benefits of financial development for the poor outweigh the cost.

Keywords: WP; GDP; poverty gap; headcount poverty (search for similar items in EconPapers)
Pages: 36
Date: 2008-03-01
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Citations: View citations in EconPapers (44)

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