Abstract and Keywords
Financial history, both recent and more distant, offers lessons that often are neglected when reforms are being considered, especially in a post-crisis rush to ‘fix the system’. This chapter offers some observations that need to be factored in to any reforms. It takes stock of research on the role of finance and what works and what does not in policies that affect it. It then examines three topics in finance that have and may again hamper financial sector development, but that are receiving less attention than they deserve: the problems of insufficient size of financial systems and their diversification; financial repression, and how to manage it; and the need for dynamism and oversight in financial regulation, to enable societies to maximize the safety of the sector while still enjoying its benefits. Current reformers would do well to take account of these factors in their plans if they hope to avoid more crisis and reform.
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