This paper is part of an ongoing research project by the authors. The objective is to provide measures of the relation between growth and the depth of the financial system. Their research updates earlier work on the problem, beginning with Goldsmith's classic treatise, Financial Structure and Development (1969). Their work is both comprehensive and systematic. It is likely to be a useful guide to anyone planning to study in the area.

The central theme is in sharp contrast to most of the recent work in growth theory. This new work tends to abstract from the organization and performance of markets as a factor in development, and instead focuses on endogenous technological change as the engine of growth. Financial trade is typically frictionless in these frameworks. Miller–Modigliani applies. As a consequence, these frameworks contain no predictions about the relation between financial markets and development.

I view the objective of the authors' research and related work by others as an effort to redirect some attention to studying how the evolution of markets, particularly financial markets, contributes to the growth process. In this regard, the work returns to an earlier tradition in the development literature, one associated with Gurley and Shaw (1955), Goldsmith (1969) and others. The research also follows recent work in macroeconomics which has been examining the role of financial market imperfections in the business cycle (see Gertler, 1988, for a survey). Some of the general methodology that this macroeconomics literature has used to study how credit market frictions might propagate business cycles is now being applied to consider how these frictions might affect growth.