Date of Award

2017

Document Type

Thesis

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

Monica Das

Abstract

This paper studies the relationship between finance, financial services, and economic growth. More particularly, this study attempts to answer the following two questions: What is the relationship between the size of the financial sector and economic growth? And how do different types of financial services impact economic growth? Understanding the dynamics between the financial sector and economic growth is extremely important from an intellectual as well as practical perspective. Intellectually speaking, it is safe to say that finance as a sector and financial services in general do not have a very good reputation in popular culture, especially in the post 2008 world. Hence, understanding the how finance impact economic growth will put the public opinion of finance to test. Practically speaking, understanding the relationship between finance and growth is extremely important from a public policy and regulatory perspective since finance has proven itself to be impactful and relevant after it sent the global economy into a the deepest recession in a century. If policy makers have insights on the relationship between finance and social wellbeing, they will be able to assess whether (1) this relationship is linearly positive or whether it diminishes at some point. If finance impacts society positively up to a point, policy makers will be able to create regulation that disincentives the size of the financial sector to grow beyond healthy levels. At the same time, if policy makers had insight on (B) which financial activities/services are more harmful to social welling than others, then they will be able to create an incentive system or a legal framework that encourages certain type of activities while limiting others.

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