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Understanding Dollarization by Erick W. Rengifo, Emre Ozsoz

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5Dollarization, Financial Deepening and Financial Inclusion

5.1Introduction

Financial deepening refers to the availability of funds provided by financial intermediaries to final users (individuals, governments and firms). Additionally, financial inclusion refers to the availability of financial products (deposits, savings, loans, etc.), and how easily or widely these products are accessed by most economic agents in an economy.

Literature has shown that over the long run, financial deepening is an important catalyst for economic growth in emerging markets (see Darrat, Elkhal and McCallum, 2006 among others). Countries with deep credit markets enable entrepreneurs to tap into much needed capital for growth. In return, growth provides jobs and economic ...

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