Jc. Berthelemy et A. Varoudakis, ECONOMIC-GROWTH, CONVERGENCE CLUBS, AND THE ROLE OF FINANCIAL DEVELOPMENT, Oxford Economic Papers, 48(2), 1996, pp. 300-328
This paper aims to show and test the existence of a poverty trap linke
d to the development of the banking sector. Our theoretical model exhi
bits multiple steady state equilibria due to a reciprocal externality
between the banking sector and the real sector. Growth in the real sec
tor causes the financial market to expand, thereby increasing banking
competition and efficiency. In return, the development of the banking
sector raises the net yield on savings and enhances capital accumulati
on and growth. The aim of our econometric tests is to check the existe
nce of multiple steady states associated with financial and educationa
l development.