The political economy of financial development

摘要

Political economy theories of financial development argue that in countries where a narrow elite controls political decisions, financial development may be obstructed to deny access to finance to potential competitors. We use panel data on developed and developing countries from 1975-2000 to examine the effect of a country's democracy characteristics and regime change on financial development. Our results show that regime stability and democracy promote financial development, with additional benefits from fully democratic regimes.