The evolution of debt and equity markets in economic development

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Abstract
As noted by Gurley and Shaw, there is a typical pattern of economic development in which the evolution of the financial system is an essential aspect of the growth process. We focus on one component of this evolution: the increasing importance of equity markets as an economy grows. We develop a growth model where capital accumulation is financed externally through a combination of debt and equity. We illustrate why equity market activity might grow - often very rapidly - as an economy develops. We also illustrate why access to equity markets may not be needed in the early stages of economic development. (This abstract was borrowed from another version of this item.)
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