| This dissertation starts off by surveying (in chapter one) the major works that are of relevance to the area of financial development. It establishes the links between finance and growth and then highlights five areas that are of direct relevance to financial reform in developing countries: the effect on the liberalization's outcome of (a) the financial sector's structure, (b) financial sector health, deposit insurance, and supervision, (c) the interaction between stabilization efforts and financial reform, (d) the dynamic adjustment of the economy to financial liberalization; and (e) informal finance. Within the last area, the dissertation spends some effort establishing the questions that require theoretical treatment as well as empirical investigation. The first of the theoretical chapters investigates the role of the superior information possessed by informal financiers relative to formal ones. The model provides an explanation of how markets are segmented between formal and informal financiers as well as the effect interest rate liberalization has on the economic behavior of both groups. The second model assesses the origin of the informal financiers' efficiency relative to commercial bankers by examining their ability to "punish" a defaulting borrower more efficiently that the latter group. The last chapter is an empirical study that focuses on, and derives lessons from the financial reform experiences of five countries; it provides evidence and "policy lessons" on some of the questions raised in the earlier chapters. |
