Inflation and financial deepening. Comment

Abstract

In a recent paper, Moore (1986) has criticized McKinnon's (1976) analysis of the relationship between a country's savings propensities and its money-income ratio on both logical and empirical grounds, and has proposed an alternative treatment. We argue here that Moore's critique and proposed alternative, while containing useful insights, are theoretically and empirically problematic, and we propose a synthesis of McKinnon's and Moore's treatments. We also develop a simple growth model, based upon our synthesis, which is shown to generate certain significant implications for the neo-structuralist critique of the McKinnon-Shaw financial liberalization prescription. © 1989.