Political Economy of Financial Development

The development of financial sectors in many countries has been recognized as a key factor in their economic growth over recent decades. However, this has not been enough to motivate authorities to advance financial development, which remains uneven across countries. While the advantages of better financial development are clear, understanding the factors behind success remains a challenge. This paper focuses on this issue, aiming to examine financial development through the lens of political economy and summarize findings from related studies within this framework. It shows that research on the “finance-growth nexus” can be interpreted politically, revealing, for example, the non-linearity of the relationship and the varying sensitivity of economic growth to financial depth indicators across countries. The analysis also highlights how special interest groups hinder the development of certain financial market sectors, particularly financial inclusion. In Russia, this situation is evident in the collective investment market, where financial services remain insufficiently accessible, and market depth lags behind other BRICS countries. The study suggests that financial access can be improved through technological development and deeper international integration, though challenges remain, including digital inequality and the construction of opaque financial contracts. Additionally, countries with different levels of financial development may not equally benefit from globalization, posing further constraints. These issues offer promising avenues for future research.