Can There Be Too Much Finance? A Complex Answer to a Simple Question

This paper provides a critical review of the Too Much Finance literature, both in its academic contribution and as response to the earlier finance and growth literature. We describe the academic origins and development of the finance and growth literature and discuss pitfalls with the commonly used indicators of financial development. We explore how the finance and growth research findings can be translated into policy recommendations including with respect to the trade‐off between growth and stability. Finally, we argue that the question of “can there be too much finance” contains actually three questions: can there be too much credit, can there be too large a financial sector, and can there be too much financial development.