Synthesizing a giant literature: a narrative of quantitative evidence on causes and consequences of financial sector development

The aim of this synthesis paper is to provide a narrative to the empirical findings of the comprehensive literature review concerning the quantitative effects of financial development on economic growth and employment and various determinants of financial sector development. The literature review has been restricted mostly to high-quality academic research that focus on developing countries over the period of 1960-2012. Due to data constraints, this review also includes cross-country analysis, where developed and developing countries are stacked together. The main findings include (i) a positive relationship between financial development and economic growth and employment subject to a number of qualifications, (ii) a complicated relationship of regulations and supervision with financial sector development and (iii) a positive relationship between enabling institutional environment and financial sector development. This review also clarifies some missing avenues in the literature and provides a number of suggestions for future work.