Enabling financial markets to effectively perform this essential function is by no means easy; financial markets must solve information problems to ensure that funds actually go to those with productive investments, so that they can pay back those who have lent to them.
Financial development involves innovations or liberalization of financial markets that improve  1  I thank Andreas Lehnert for his excellent assistance and helpful comments. My remarks reflect only my own views and are not intended to reflect those of the Federal Open Market Committee or of anyone else associated with the Federal Reserve System.