It is mostly assumed that financial modernisation affects growth either directly via lower cost of capital or indirectly via (1) the productivity channel, (2) its effect on the buildup of physical and knowledge capital or (3) a reduction in risk premia.
Indeed, one major strand of cross-country/cross-industry research has emphasised the productivity channel, stating that financial modernisation has a positive impact on the growth of industries that are  1  In line with the title of the conference, the term “financial modernisation” (instead of “financial development”) is used throughout the speech, as this seems more appropriate when talking of changes of financial systems in industrialised countries.