Financialization and Economic Growth in Developing Countries

Noemi Levy-Orlik

International Journal of Political Economy, 2013, vol. 42, issue 4, 108-127

Abstract: The impact of financialization in developing economies that have weak capital markets is explained in terms of external capital mobility that, instead of increasing financial debt and unfolding financial crisis, changed the structure of the productive sector. Exports became the main engine of economic growth, displacing fixed investment without being able to achieve external current account balances. Under these conditions, developing countries remained dependent on external capital flows, which reduced their ability to generate stable economic growth, keeping wages below those of international competitors and financial returns above international averages. It followed that internal markets dried up, labor's share of total income fell, and crises were the result of external capital outflows that were triggered by exogenous changes (higher interest rates in developed countries).

Date: 2013
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DOI: 10.2753/IJP0891-1916420406

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