...literature review discusses objectives of financial development and economic growth as well as existing relationship of this concept. Financial development is strongly connected with economic situation, but we do not know for sure if this always implies economic growth. There are many factors which influence relationship between financial development and economic growth and its effects such as financial liberalization, government ownership of the banks, monetary policy and rate of inflation, institutional and regulatory framework of financial markets in particular countries. Many researchers are trying to give the right questions and explanations on this field but still there are unresolved issues and implications which give open space for future investigations. Table of Contents 1. Introduction………………………………………………………….2 2. Literature Review……………………………………………………2 2.1. Relationship between Financial Development and Economic Growth………2 2.2. Empirical methodologies……………………………………………………..5 2.3. Effects of Merger and Acquisitions in Bank Industry on relationship between financial development and economic growth…………………………………7 3. Conclusion…………………………………………………………....8 4. Reference List………………………………………………………..9 1. Introduction Financial system is a basis of current economic trends and there is no possibility of doing businesses...
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...financial development and economic growth nexus 1 1.3 Review of the empirical literature 4 1.3.1 Time series 5 1.3.2 Cross-country studies 6 1.3.3 Panel data studies 7 3 Conclusions 8 4 References 9 1 Introduction “Finance is powerful. The financial system can be an engine of economic prosperity – or a destructive cause of economic decline and misery.” Levine, R. (2011) p.85 Obviously, financial system and economy are related. But what is the nature of this relationship? The objective of this paper is to critically evaluate the existing theoretical and empirical literature on the finance-growth nexus. What is the role of the financial sector in economic growth? Does finance cause growth or simply follows it? There is no wide agreement about this task among recognised economists. Even Nobel Prize winners disagree in regard to the role of finance in economic development. Levine (2003) states that the role of finance as a major determinant of economic growth is over-stressed. Moreover Levine (2003) argued that where enterprise leads finance follows. Quite the opposite, important acknowledgment should be taken into account and it follows as “[the idea] that financial markets contribute to economic growth is a proposition too obvious for serious discussion.” Levine (2003) p.1 Similar to that, he also declared that the finance growth nexus cannot be safely ignored without substantially impeding our understanding of economic growth. ...
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...make up the OECD (Organization for Economic Cooperation and Development) there are wide differences in the contributions to output from each industry....
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...Stock Market Development & Economic Growth in Bangladesh –Rabita Sabah Abstract This paper examines the state of relationship between the stock market development & economic growth in Bangladesh. As a third world country, the economic development of Bangladesh is still dependent on the ups & downs of some macroeconomic as well as capital market factors , like, GDP, real GDP, GDP growth, market capitalization, volatility of stocks, Financial Statement information and other financial factors. This paper has been prepared & presented to have a clear view about contribution of capital market to the economic growth of Bangladesh. So far I know, no analytical study regarding this issue still has not been conducted in Bangladesh. So that I’ve desired to study on this topic in a deeper detail to focus on the relationship of capital market & economic growth from both economic & accounting point of view. I also have focused on how the reporting of the Financial Statements of different institutions according to various local & international standards can have an impact in accelerating the economic advancement in Bangladesh. In assessing the impact of stock market on our country’s economy, I have used some statistical techniques & finance issues as correlation & regression analysis, measurement of cost of capital, index method etc based on the data obtained from the main stock exchange of the country DSE. The study reveals that there is a very close & positive relationship of stock...
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...Consequences of the Industrial Revolution Two significant social consequences of the First Industrial Revolution were working conditions in the factories and urban living conditions from the growth of cities. The Industrial Revolution of the 1700s was a time of drastic change and a major move towards technological and social and economic changes. Socially, this was a transfer from a largely rural population in which a livelihood from agricultural and artisan craftsmanship moved towards urban centers which engaged in factory manufacturing (Fitzgerald, 2000). This was the forefront to a new way of life. The Industrial Revolution grew out of the development of the Industrial Economy with the appearance of factories from the technological inventions in several areas such as mining, iron, chemicals, and steam power. It was steam power that drove a widespread growth of several areas in particular the textile industry. Out of this innovation a new concept of the industrialized factory was introduced to society. The factory would be largely responsible for the growth of urbanization as workers moved to these urban areas in search of employment at the new factories (Fitzgerald, 2000). Due to the urbanization of these cities, the infrastructure could not keep up with the population growth. These urban areas became inundated with people looking for work. Urban areas lacked decent housing, sanitary codes, education, and police protection. The densely packed and poorly constructed...
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...serta peningkatan pesat inovasi kewangan dalam ekonomi berasaskan kredit boleh mempengaruhi pertumbuhan ekonomi di sesebuah negara. Ini yang menjadikan peranan sektor kewangan terhadap pertumbuhan ekonomi sering menimbulkan perdebatan di kalangan ahli-ahli ekonomi. Misalnya Miller (1998) yang menyatakan bahawa sektor kewangan telah dilebih-nyatakan(over-stressed) terhadap pertumbuhan ekonomi. Manakala, ahli ekonomi lain seperti Schumpeter (1911) dan Mikinnon (1973) yang menggunakan pelbagai kaedah ekonometrik telah memberikan kesimpulan yang sama, iaitu sektor kewangan adalah penting untuk mempengaruhi kegiatan ekonomi di sesebuah negara. Pandangan ini menyokong hipotesis sektor kewangan mendorong pertumbuhan ekonomi (finance leading growth) atau dikenali sebagai hipotesis dorongan penawaran. Ini bererti pembangunan sektor kewangan adalah pra-syarat kepada perkembangan kegiatan ekonomi. Sebaliknya, jika pembangunan...
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...state of relationship between the stock market development & economic growth in Bangladesh. As a third world country, the economic development of Bangladesh is still dependent on the ups & downs of some macroeconomic as well as capital market factors , like, GDP, real GDP, GDP growth, market capitalization, volatility of stocks, Financial Statement information and other financial factors. This paper has been prepared & presented to have a clear view about contribution of capital market to the economic growth of Bangladesh. So far I know, no analytical study regarding this issue still has not been conducted in Bangladesh. So that I’ve desired to study on this topic in a deeper detail to focus on the relationship of capital market & economic growth from both economic & accounting point of view. I also have focused on how the reporting of the Financial Statements of different institutions according to various local & international standards can have an impact in accelerating the economic advancement in Bangladesh. In assessing the impact of stock market on our country’s economy, I have used some statistical techniques & finance issues as correlation & regression analysis, measurement of cost of capital, index method etc based on the data obtained from the main stock exchange of the country DSE. The study reveals that there is a very close & positive relationship of stock market development of Bangladesh with this country’s economic growth. And also another result of this study that...
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...Ethiopia`s development from famine to economic growth The classic theory of modernization has its origins in the 1950`s, a post-war period which challenged strategists to investigate the problems faced by the underdeveloped countries, in their attempt to provide aid programs and technological assistance and promote long-term economic growth and political stability. Typical traditional societies were analyzed in the processes through which they should develop into modern social structures by following an unidirectional path similar to the ones already tested by the Western societies. Several factors that contribute to the development of a modern society (including technological, economic, social, political, military and cultural innovations) were illustrated in many studies of this theory. The complexity of outcomes was generally overlooked, making necessary more than just the classic theory for a proper analysis of a country`s modernization. Thus, the Harvard Project, the most relevant study on the social and cultural aspects of development, emphasized that an ideal model can`t be defined, as the modern personality corresponds more to a desirable plan of modern society than to the contradictory nature of modern reality. Therefore, I will further seek to determine Ethiopia`s (one of the countries severely affected by famine for the last years) development in its process of modernization. Ethiopia has been plagued by famine going back to the 16th century. While climatic conditions...
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...between China and Sub-Saharan in economic growth and development This essay will try to analyse the difference between China and Sub- Saharan region countries on the economic growth and development issue from an overall view. In order to contrast the different development and growth methods between china and a whole Sub-Saharan region of countries, the essay will introduce the solow model in order to simplify the analysis, because in order to conduct a precise research, too many factors need to be controlled, so introducing a model which can simplify but not change the fact is appropriate. The basic assumptions of the solow model remain unchanged in this essay because the first assumption of constant returns will stand as both China and Sub- Saharan countries are economy which are large enough “that the gains from the specialization have been exhausted” (D. Romer (2011), "Advanced Macroeconomics", McGraw–Hill, New York, 1996.). The second assumption which neglects other impacts on the economy development will be discussed in the later paragraphs like policy, population, human capital and so on. Figure 1. China and Nigeria’s annual growth rate of GDP per capita (%). Data source: World Bank, World Development Indicators Figure 2. China and Nigeria’s broad money of GDP per capita (%). Data source: World Bank, World Development Indicators Figure 3. China and Nigeria’s labor force of total population (%). Data source: World Bank, World Development Indicators As we can see...
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...population growth and economic development. What are the competing perspectives? Which do you think is most useful, and why? 5 points Chapter three focuses on the relationship between population growth and economic development. Livi-Bacci provides potential relationships between the two by focusing on certain theories. This chapter opens up with the two competing perspectives of these potential relationships. The first is seeing population growth as a negative force, putting pressure on fixed or limited resources, eventually leading to an increase in poverty. Malthus backs up this negative relationship perspective with the law of diminishing returns. Diminishing returns will occur when population growth increases and, in a fixed environment, a point is reached, causing the output to diminish gradually. Diminishing returns will cause for poverty, while the fixed, limited resources will level off. Malthus argues that population growth is determined by the growth of the economy. The Malthusian model demonstrates population checks, keeping the fate of the population in the hands of...
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...Letter of Motivation Dear Sir/Madam I hereby wish to express my interest in your Master in International Business and Management Program. Companies and their operations in national and international markets have always fascinated me. That is why I am aiming for a profession in that direction. In search of the right education and qualification for the career I’m striking for Hochschule Osnabrück University of applied science appear as one of the best places to study. Not just because of its excellent rankings but also because of its International Management Program, which combines the academic theory with important soft-skills and meaningful knowledge about foreign cultures and the intercourse with them and all of that in a personal environment. On an international market that is driven by globalization the importance of teaching exactly those additional skills increased significantly in the last few years. You cannot do business globally without interacting with foreign cultures and for that you need to understand them. As a fundament for the applied degree program I can show both theoretical and practical prerequisites. For that I want to take this program for a long term results where I can implement this knowledge to expand my own business or my near ones to globally. I live in a third world country. So, getting proper business knowledge is very difficult for us. We get only theoretical knowledge rather than practical knowledge. There is a very few scope to survey...
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...To what extent can free trade promote economic development and economic growth in LEDCs (30 marks) Trade protection is the process of erecting barriers to trade, such as taxes on imports, called tariffs, and trade liberalisation is the process of making trade free from such barriers. Free trade its natural course without tariffs, quotas, or other restrictions. Developing countries can benefit from free trade by increasing their amount of or access to economic resources. Nations usually have limited economic resources. Economic resources include land, labour and capital. Small developing nations often have the lowest amounts of natural resources in the economic marketplace. Free trade agreements ensure small nations can obtain the economic resources needed to produce consumer goods or services. This shows economic growth as there is an increase in the economy's productive potential and they can produce efficiently. However, it is argued that free trade can harm the environment because LEDC may use up natural reserves of raw materials to export. Also countries with strict pollution control may find consumers import the goods from other countries where legislation is lax and pollution is allowed. However, supporters of free trade would argue that it is up to individual countries to create environmental legislation. Free trade usually improves the quality of life. Nations can import goods that are not readily available within their borders. Importing goods may be cheaper for...
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...STOCK MARKET DEVELOPMENT ON THE MALAYSIAN ECONOMIC GROWTH: AN EMPIRICAL INVESTIGATION BY HAFSAH AHMAD A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE DEGREE OF DOCTOR OF PHILOSOPHY IN ECONOMICS KULLIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA MAY 2005 1 ABSTRACT This study investigates the long-run relationship between financial development (banking sector and stock market development) and economic growth in Malaysia. Six variables based on Malaysian quarterly data from 1978:1 to 2002:4 are employed, namely real GDP per capita, investment rate and ratios of credit, deposit, market capitalization, and value of shares traded to GDP. Two dynamic frameworks are adopted - Vector Auto regression (VAR) with error correction formulation for causality analyses and dynamic OLS (DOLS) procedure for estimation of growthfinance long-run relation. Causality analyses show that there is bi-directional causality between financial development (banking sector and stock market development) and economic growth. Analyses on growth-finance long-run relations indicate that banking sector development and stock market development individually have an independent positive effect on long-run economic growth. They enhance economic growth through both channels – the volume and efficiency of investment, with the latter being the main source of their independent effect. The study also shows that banking sector development and stock...
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...Introduction In modern economic society, while the global countries economic become more and more integrated, each member country focuses on the financial developments and economic growth, so that they can occupy one position in the modern competitive economic environment. Financial development involve lots of factors, including producing information about possible investments and allocating capital; monitoring the firm performance and corporate governance; trading, diversification, and management of risk; mobilization and pooling of savings; and easing the exchange of goods and service. Usually the financial development level is primarily determined by the local institutional quality, the extent of government police, geographic elements, native income level and cultural tradition. These factors formed the economic environment in which the banks and other financial firms to make decision for investment project and exogenous financing, furthermore, the customers decide whether consumption or saving, moreover, the financial intermediaries finance the fund in which approach from savers to borrowers. The well financial system can perfect the effect of information, enforcement and transaction cost on the saving rate, investment decision and technological innovation, and steady state growth rate. Financial market channel the fund to investment opportunities to get the profit, so if the financial system cannot work well, the economic growth also more or less affected. The essay mainly...
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...Inquires CORRELATIONS BETWEEN CAPITAL MARKET DEVELOPMENT AND ECONOMIC GROWTH: THE CASE OF ROMANIA1 Laura OBREJA BRASOVEANU PhD, Associate Professor, Finance Departament, University of Economics, Bucharest, Romania E-mail: laura_obreja@yahoo.com Victor DRAGOTA2 PhD, University Professor, Finance Departament, University of Economics, Bucharest, Romania E-mail: victordragota@yahoo.com, victor.dragota@fin.ase.ro Delia CATARAMA PhD Candidate, Assistant Professor, Finance Departament, University of Economics, Bucharest, Romania E-mail: delia.catarama@fin.ase.ro Andreea SEMENESCU3 PhD Candidate, University Assistant, Finance Departament, University of Economics, Bucharest, Romania E-mail: asemenescu@yahoo.com Abstract: In the literature on endogenous growth, the link between capital markets development and economic growth has received much attention. Although there are many studies regarding this aspect, approaches on emergent ex-communist countries’ economies, especially for Romania, are very few comparatively to the general cases. Our paper examines the correlation between capital market development and economic growth in Romania using a regression function and VAR models. The results show that the capital market development is positively correlated with economic growth, with feed-back effect, but the strongest link is from economic growth to capital market, suggesting that financial development follows economic growth, economic growth determining financial institutions to change...
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