The financial sector and economic growth?
The Mankiw-Romer-Weil (1992) augmented Solow model is extended to incorporate the financial sector in this study. Distinguishing between financial capital, physical capital and human capital, the study attempts to identify in particular, the effects of financial capital on economic growth. The financial capital augmented model is tested on 36 emerging and developing economies. Strong support is found for the financial capital augmented model.