INTERACTION BETWEEN F INANCIAL INTERMEDIATION EFFICIENCY AND ECONOMIC GROWTH

Financial intermediaries have the key role in making a connection between savings and investments. Given the fact that an effi cient transfer of savings into investments is made more diffi cult by transaction and information costs, fi nancial intermediaries are specialized in minimizing the said costs per unit of invested capital. They are also trained to identify productive and innovative investment endeavors which contribute to the growth of real output. Real output growth is the basis for increasing the fi nancial potential, which creates the basis for the development of fi nancial intermediaries. In connection with that, apart from the analysis of the relevant factors making the process of the mobilization and transfer of savings more diffi cult, the theoretical models that put an emphasis on the relationship between the effi ciency of fi nancial intermediation and economic growth are discussed in the paper. The research results are indicative of the fact that the improvement in fi nancial intermediaries’ business doing enables faster economic growth. Simultaneously, the growth of the economic activity increases the scope of the business operations conducted by fi nancial intermediaries. Thanks to the eff ects of the economies of scale that contribute to a reduction in transaction and information costs, the effi ciency of fi nancial intermediations grows.