Moreover, the process of financial development can also further improve the performance of already well-integrated markets and thus enhance growth. What I call financial development is the process of introducing financial innovations and organisational improvements in the financial system that reduce asymmetric information, increase the completeness of markets and the contracting possibilities of agents, reduce transaction costs and increase competition.
Both financial integration and development are therefore crucial in contributing to the efficiency and stability of the financial system. This is the theory. But what do we make of this? What are the practical consequences and policy implications of the theoretical perspective?