Investment Finance in Economic Development

Investment Finance in Economic Development

Investment Finance in Economic Development

Investment Finance in Economic Development


As a result of the liberalization of the 1980s, the financial system has acquired a prominent role in developing economies. It is now conventional wisdom that 'financial liberalization' is themeans to stimulate economic development.
Investment Finance in Economic Developmentchallenges this assumption and offers an alternative view. The book presents a post-Keynesian approach to the role of banks, financial markets and savings in economic development. It departs from the conventional belief that financial institutions are mere intermediaries between savers and investors, to show that banks have a key, active role in the process of investment finance and growth. Further, financial markets, as the lociof allocation of financial savings, are shown to have an important role in supporting financial stability during the process of growth.


Victoria Chick

Rogério Studart worked out the ideas in this book as a PhD student at University College London from 1988 to 1992. It was great fun watching the thesis develop through many intense discussions, seminars and summer barbecue parties. While these ideas were developing Rogério's wife Christine was pursuing a Masters degree and they had two lovely daughters. Their time in London was fruitful indeed.

The feature which has long served as the core for development economics as a separate subject is surely the recognition of the specific circumstances of individual countries, yet the mainstream analysis of the financial problems of developing countries is characterised by a proposition long left behind by the institutional structure of most of those countries: that the main inhibitor of investment is insufficient saving. This proposition was valid in eighteenth and even early nineteenth century Britain, where the development of financial institutions lagged behind the needs of the transforming economy; but it is no longer valid in countries with developed banking and financial systems of their own or access to the international financial markets.

Rogério Studart takes this proposition as his starting point and shows that it is the foundation of two of Keynes's propositions: that investment precedes and causes changes in saving, and that finance is independent of saving. Studart uses these propositions to provide a thorough critique of two-gap analysis and the potent modern panacea of financial liberalisation. He substitutes for these conceptions an analysis which develops the institutional foundation of Keynes's distinction between finance and saving, finding a role for saving in the funding, rather than the financing, of investment.

Funding is shown to be important as a means by which the liquidity of the banking system is perpetually restored, thus mitigating the danger of yet further investment: it is essential to find finance, but it is equally

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.