“Ideal” financial development and financial overaccumulation

Sara Hsu and Jianjun Li

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we examine whether there is an “ideal” level of financial development, somewhere between financial capital overaccumulation and financial capital underaccumulation. We construct indexes of non-bank or speculative financial development, financial (bank) deepening, and production. We find that financial deepening does support what we dub the “speculative spread,” that is, the difference between non-bank or speculative finance and real production. As financial deepening grows, the speculative spread may grow in step. Where the speculative spread exceeds deepening, financial instability may occur. Hence financial deepening may promote or constrain economic development.

Keywords: financial deepening; economic growth; profit rate; overaccumulation (search for similar items in EconPapers)
JEL-codes: C60 G01 O40 (search for similar items in EconPapers)
Date: 2012-04-11
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Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/41243/2/MPRA_paper_41243.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:38035

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