By How Much Does Conflict Reduce Financial Development?

Tony Addison, Abdur Chowdhury () and Mansoob Murshed

No DP2002-48, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: Financial development is vulnerable to social conflict. Conflict reduces the demand for domestic currency as a medium of exchange and a store of value. Conflict also leads to poor quality governance, including weak regulation of the financial system, thereby undermining the sustainability of financial institutions. Conflict therefore reduces the social return to financial liberalization and other financial-sector reforms. This paper presents a theoretical model integrating the effects of conflict and financial liberalization, and then tests the model on data for 79 countries.

Keywords: Conflict management; Economic development; Economic policy; Financial institutions; War (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (19)

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