Financing Development:The Role of Information Costs

摘要

Financial development "accelerates economic growth and improves economic performance to the extent that it facilitates the migration of funds to the best user, i.e., to the place in the economic system where the funds will earn the highest social return," noted Raymond W. Goldsmith (1969, p. 400) some 40 years ago. Information production plays a key role in this process of steering of funds to the highest valued users. If the costs of information production drop, then financial intermediation should become more efficient with an associated improvement in economic performance.