This study is concerned with the causal relationship between money, finance and growth. In the first chapter, some of the empirical research on the subject is discussed. It establishes evidence of a positive dependence between real and financial growth. The findings do not, however, explain the direction of causality. In the second and third chapters, the cause-effect relationship is therefore analyzed in theoretical terms. The theory is based on a barter system into which money, and

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... ney, and subsequently direct and indirect financial markets, are introduced. The objective is to determine whether these innovations are likely to induce increases in the equilibrium growth rate of an economy. If either or both increase growth it follows that money and/or finance is causal. At the same time, these markets would acquire great practical significance for the development process. The analysis refutes the hypothesis of causality from money and financial markets to growth. Neither steady state growth rates can be shown to increase, nor savings rates. The sole significant effect of both innovations appears to be a rise in income-per-capita levels but not in their rates of growth. The concluding chapter uses the results of the theory for deriving policy recommendations for Thailand. At first, policy objectives are defined and their implications for the optimal savings ratio. Actual Thai data are then compared with the optimum condition and it is found that past performance may satisfy long-term savings objectives. The study concludes by estimating the relative size of output, due to inefficiency in the present structure and performance of the financial sector in Thailand. Existing inefficiencies are shown to be significant, thus necessitating policy changes.