Summary notes on paper on the relationship between the financial system and economic growth

I personally agree with Hassan, Sanchez and Yu (2011) that the financial system is necessary but not sufficient to guarantee a fast economic growth. As we can see from the past, before the 2007-08 financial crisis, the economists generally agreed that a larger financial system could generate higher economic growth, according to Schumpeter (1911) and King and Levine (1993). However, since the financial crisis, the economists' opinions have divided. Reinhert and Rogoff (2009) suggests that larger financial system could have a mixed outcome. Aghion (2010) thinks a larger system can alleviate liquidity constraints facilitating long-term investment and reduce the volatility. On the other hand, Cechetti and Kharroubi (2012) suggests a bigger system is bard for aggregate real growth and Blanchard and Labonne (2011) suggests that there is no clear relationship between the financial system and economic growth.