Even more importantly, the financial system also plays a crucial role in capital accumulation. However, especially in highly developed economies that typically boast sizeable and sophisticated financial sectors, the role of the financial system goes far beyond that of mere capital accumulation.
In such economies, the financial system plays a key role in identifying and funding innovations, thus helping to advance the state of technical knowledge and promoting technological progress. For these reasons alone, an efficient financial system is indispensable for growth.