...Martin Neil Baily Douglas J. Elliott The Brookings Institution July 11, 2013 The Role of Finance in the Economy: Implications for Structural Reform of the Financial Sector Executive Summary The U.S. financial system is critical to the functioning of the economy as a whole and banks are central to the financial system. In addition to providing substantial employment, finance serves three main purposes: Credit provision. Credit fuels economic activity by allowing businesses to invest beyond their cash on hand, households to purchase homes without saving the entire cost in advance, and governments to smooth out their spending by mitigating the cyclical pattern of tax revenues and to invest in infrastructure projects. Banks directly provide a substantial amount of credit in the U.S., but, unlike in almost any other economy, financial markets are the ultimate providers of most credit. Liquidity provision. Businesses and households need to have protection against unexpected needs for cash. Banks are the main direct providers of liquidity, both through offering demand deposits that can be withdrawn any time and by offering lines of credit. Further, banks and their affiliates are at the core of the financial markets, offering to buy and sell securities and related products at need, in large volumes, with relatively modest transaction costs. This latter role is particularly important in the U.S., given the dominance of markets, but is often under-appreciated. Risk...
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...Is the reliance on the financial sector an inherent weakness of the UK’s liberal market economy? The United Kingdom’s City is an internationally recognised financial centre. Given the predominance of the City, the UK’s economy finds itself accommodating to this active and volatile industry. Before discussing whether or not this reliance on the financial sector is an inherent weakness of the UK’s liberal market economy, two questions need to be explored: firstly, how liberal is the UK’s liberal market and; secondly, how reliant is it on its financial sector? This will be the focus of the first part of this essay and it concludes that with increasingly liberal policies becoming conventional wisdom in British politics, the continuing expansion of the financial sector is inevitable. The second part will analyse the consequences of the Financial Crisis and how the UK’s dependence on the financial sector is, within this context, a momentous drawback. However, the third part of this essay will explore the idea that although better regulation and governance is necessary, the UK should maintain its dominance in the financial sector as it has become inherent to British economic culture and offers comparative advantage over other economies. ________________ Political ideology and resulting policies are very influential in promoting or reducing the magnitude of certain economic sectors such as manufacturing, agriculture, mining or financial industries. The remarkable expansion of...
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...| A study on Indian Economy – Past , Present, Future 1 Introduction to area of study India has come a long way in terms of economic growth. There is broad consensus that the global centre of economic growth is moving to Asia, and as a large emerging nation with a growing middle class, India has captured the attention of developed economies looking for new investment and trade opportunities. The Softer indicators of economy – aspirations, health, and literacy – are all registering discernible improvements. Over two decades, India has implemented wide-ranging reforms that opened up the economy, dismantled the old licensing system and introduced competition into a number of sectors that had previously been dominated by public monopolies. Now, we live in a generation of relative abundance. While for the Western world it is going to be a demographic winter, we in India with some effort should be reaping a demo- graphic dividend. It is an India full of goodies –better consumption and lifestyle are in attendance all around. From the past two decades, we saw the twists in its growth and also twist in political atmosphere. With 27 per cent of the economy stagnant, it is no surprise that overall growth in India has slipped below 6 per cent. We are referring to the industrial sector, which has recorded an insipid 0.4 per cent growth in the first five months of this fiscal year beginning April 2013. It needs no emphasis that without a turnaround in this sector, a material lift to India's...
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...CHAPTER ONE INTRODUCTION 1.1 Background To The Study The financial system is created to move funds from surplus economic units to deficit economic units in order to produce goods and services and to make investment in new equipment and facilities so as to facilitate the growth of the economy and improve the standard of living of its citizens. It is generally recognized that financial system plays a catalytic role in the process of economic development. The financial system of any nation is a function of the size of its economy. A growing economy places more responsibilities on the financial sector to mobilize the needed capital to facilitate production, generate employment and income. An economy that does not experience growth on sustained basis is likely to have a very passive financial sector as there are no incentives for investment. Through the process of growth, financial system offers a wide range of portfolio options for savers and issuable instruments for investors, a function often referred to as financial intermediation (Oke, 2000). The Nigerian financial system comprises of various institutions, markets and operations that are in the business of providing financial services. These institutions can be broadly categorized into money and capital markets. While money market is a market in which short term financial instruments are traded, the capital market on the other hand deals with long term transactions. The major players in the money market are the banks and discount...
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...Abstract Financial intermediation is an important activity in the economy because it allows funds to be channeled from people who might otherwise not put them to productive use to people who will ultimately put the funds to productive uses. In line with the assumption that banking sector plays an important role in financing the investment projects, successive governments in Nigeria have carried out reforms and institutional innovations in the banking sector. The overall intention of these reforms has been to ensure financial stability so as to influence the growth of the economy and also enhance banks to play a critical role of financial intermediation in Nigeria. However, despite the fact that Nigerian banks have undergone series of restructuring/reforms aimed at strengthening the banks’ ability to efficient service delivery and fund the real sector, problems such as; inefficiency in allocating funds to the real sector, lack of long-dated funding, neglect of the core private sector in terms of credit extension, weak capacity of the banks to fund the real sector, low-level activities of banks, and illiquidity still lingers. This study therefore, examines empirically the impact of financial intermediation on the development of the Nigerian economy with the aim of determining the importance of financial intermediaries and its influence. This study found out that the financial intermediaries (banks) in Nigeria exhibit inefficiency and weak capacity in the allocation of funds to...
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...Antonio Allen BA-316-BL 3/30/2015 Financial Issue Paper Could our economy possibly be suffering because the industry is not looking at the bigger picture and instead looks at short term goals? That is the belief of some as Rana Foroohar states in her article for Time, “…because finance looks for quick growth rather than long-term rewards” (Foroohar). Her response is to that of a paper written by Stephen G. Cecchetti, a professor at Brandeis International Business School and a senior economist from BIS, Enisse Kharroubi asking why the financial sector growth out crowds the real economic growth. From another perspective comes the view that financialization has brought a systematic transformation to the capitalist economy. A four part interview printed on Truthout with Costas Lapavitas takes a look on the brighter side of how the industry has been doing great things for the economy over the past few decades. Foroohar says that because the industry invests in industries such as real estate and construction instead of in industries with more life behind them like technology or pharmaceuticals that is another reason for economic growth to be put on the back burner. Finance tends to rise from “…lower capital investment in the real economy, greater inequality, and the demise of more productive industries.” (Foroohar). This puts into perspective just why the economic growth seems to be non-existent while financial firms continues to rise. There is also the interesting point...
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...Implications of M&As of Banking sector on Indian economy Author Author Shilpa Vivek Agrawal Shreya Deepak Saraf Novel Institute of Management Studies, Novel Institute of Management Studies Chinchwad, Pune. India. Chinchwad, Pune. India. Co-Author Dr. D.M Gujarathi Chairman BOS, Cost and Works Accounting University of Pune, India --------------------------------------------------------------------------------------------------------------------- Abstract Financial System is the most important institutional and functional vehicle for economic transformation of any country. India is slowly but surely moving from a regime of 'large number of small banks' to 'small number of large banks. The process of mergers and acquisitions has gained substantial importance in today's corporate world. This process is extensively used for restructuring the business organizations. In India, the concept of mergers and acquisitions was initiated by the government bodies. M & A in banking sector have been on rise in recent past both globally & in India. With the help of mergers and acquisitions in the banking sector, the banks can achieve significant growth...
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...business relations operating in the banking sectors of Sweden and the United States (US). The main argument presented, is that the Swedish model provides a more effective outcome for both the citizens and businesses by offering greater economic stability within the internal economy and also the banking sector. This argument is supported by examples that demonstrate how the Swedish model enabled quick and effective implementation and has provided the Swedish banking sector stability since its inception in1992. Sweden has a socialist democratic system with a capitalist economy, a socialist embedded welfare system and a deregulated financial market which has benefited from constant economic growth (Central Intelligence Agency, 2010). Sweden’s growth continued till the 1990’s when it experienced the ‘1990 Bank Crisis’ similar to the American subprime mortgage crisis (Phillips, 2009). The United States has a liberal democracy with a market orientated economy which is one of the most powerful economies in the world with a GDP of $14.29 trillion (Central Intelligence Agency, 2010). However unlike Sweden the United states economy does suffer from insufficient economic infrastructure and medical and welfare systems (Central Intelligence Agency, 2010). Both Sweden and the US have central banks, the Riksbank and the Federal Reserve Bank respectively. Riksbank’s primary role is monetary policy and responsibility for stability within the economy and, in doing so has to act with in the guidelines...
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...Acknowledgment Now-a-days globalization brings challenges for Bangladesh and private sector of Bangladesh. By facing these challenges if private sector of this country could success then the country will receive opportunities of globalization. I would like to thank my course teacher Dr. Salehuddin Ahmed (Economic Condition Analysis) for giving us this opportunity for assigning us with this paper. It helps me a lot to know about the challenges and opportunities that Bangladesh and private sector of this country faced and received from globalization while I am making this portfolio. This portfolio helps me a lot to know each and every area where globalization brings opportunities for our private sector and those areas that facing challenges. And this paper will also demonstrate that the main driver of progress has been Bangladesh private sector. Then we like to thank those people who really helped us by providing valuable information during prepare the paper. Read more: http://essaybank.degree-essays.com/business/globalization-for-bangladesh.php#ixzz2EWf1f3By ABSTRACT This paper examines the role of private sector in Bangladesh in the context of Globalization since the change of the first government of the independent of Bangladesh. Actually Bangladesh has undertaken a wide range of reforms to open the economy in the areas of trade, finance and investment. The globalization efforts in these areas have produced some positive results. But in the overall...
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...its impact on Indian Economy: Developments and Challenges Globalization (or globalization) describes a process by which regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade. The term is sometimes used to refer specifically to economic globalization: the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology. Globalization as a spatial integration in the sphere of social relations when he said “Globalization can be defined as the intensification of worldwide social relations which link distant locations in such a way that local happenings are shaped by events occurring many miles away and vice – versa.” Globalization generally means integrating economy of our nation with the world economy. The economic changes initiated have had a dramatic effect on the overall growth of the economy. It also heralded the integration of the Indian economy into the global economy. The Indian economy was in major crisis in 1991 when foreign currency reserves went down to $1 billion. Globalization had its impact on various sectors including Agricultural, Industrial, Financial, Health sector and many others. It was only after the LPG policy i.e. Liberalization, Privatization and Globalization launched by the then Finance Minister Man Mohan Singh that India saw its development in various sectors. Advent of New Economic...
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...i ACFI 2005 : Finance - Tutorial Solutions Tute 1: 07/09/12 Chapter 1 A modern financial system: an overview 2. (a) Discuss the role of money in a financial system. • Money is a financial asset that facilitates financial and economic transactions. • Money is a medium of exchange—swapped for goods and services. • Money is a store of value—wealth is held or measured in money terms. • Money is a standard of deferred payment—used to record indebtedness. • Money is a unit of account—transactions are priced in money terms. • Currency is generally divisible, portable and durable. (b) Does money have to be currency? If not, what are some alternatives? • Money is anything that is universally acceptable as a medium of exchange. • Further, money generally has the characteristics of being divisible and a store of value. • Examples—currency, EFTPOS and digital money. 4. The major financial institutions within the international markets fall into five classifications. Identify and briefly explain each of these classifications. Give an example of different types of institutions that operate within a classification were appropriate. • Depository financial institutions—they attract savings from depositors and investors and provide loans to borrowers. Examples: commercial banks, building societies and credit unions. • Contractual savings institutions—there liabilities (sources of funds) are contracts that generate periodic cash flows, such...
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...Professor: Mr. Wilberne Persuad Contents Introduction: 3 Literature Review: 4 Background: 4 Further look at the IMF: 4 The World Bank: 5 Loans facilities offered by the IMF: 5 Definition of Caribbean Business Environment (The Small Open Economy Model): 6 Characteristics of the Caribbean Business Environment: 6 Definition of a Financial Crisis: 7 What causes a Financial Crisis to occur? 8 Conclusion: 9 Descriptive analysis 10 Methodology 15 Conclusion 16 Social Instability: 16 Further look at the impact of the IMF’s procedures/objectives: 16 Potential Threat 17 Policy Responses: 18 Internally: 18 Externally: 18 Bibliography: 20 Introduction: This research paper aims to analyze the process of The International Monetary Fund in Barbados and how the country was affected by their guidelines. Barbados has been said to be one of the developing countries within the Caribbean Business Environment. However due to external shocks as well as weak domestic policies, Barbados was forced to ask the IMF for their aid as a last option, to stabilize the country’s economy. This research paper intends to highlight that the significance of The IMF as well as the impact as it relates to small open economies. There will be a literature review informing all of the relevant information pertaining to the general subject topic. Afterwards, a case study will be presented on Barbados and our findings. Once all the information has been disclosed, a conclusion...
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...Relationship between Real Estate and Financial Sectors in Dubai Economy Dr. Eisa Abdelgalil Data Management and Research Department Table of Contents Table of Contents............................................................................................................i ......................................................................................................................ﻣﻠﺨﺺ ﺗﻨﻔﻴﺬيii Executive Summary ..................................................................................................... iii 1. Introduction................................................................................................................1 1.1 Background ..........................................................................................................1 1.2 Objective ..............................................................................................................1 1.3 Research questions...............................................................................................1 1.4 Methodology and data..........................................................................................2 1.5 Outline of the study..............................................................................................2 2. Dynamic of Real Estate Market.................................................................................3 3. Impact of Real Estate on Financial Institutions ........................................................
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...SERVICE INDUSTRY IMPACT ON NATIONAL ECONOMIES Student’s Name Course code + name Professor’s name University City, State Date Introduction Service industry is a business category that involves the provision of services to other businesses or to final customers. Service industry has improved in the recent decades forming the backbone of several nations’ economies. The common service industries include tourism, computer services, entrepreneurship and accounting among many others. The growth of the service industry has been reflected in several economic platforms. For instance, the current list of Fortune 500 companies has more service companies on it compared to manufacturing companies (Encyclopedia Britannica, 2015). In addition, the old product oriented business tradition has been replaced by a service-product continuum. This business revolution is happening in both the developed and developing countries as a result of a high price elasticity of demand of services. This means that services have dominated the economies of these countries leading to an overall global economic change. Background of the Service Industry The service industry has been in the economy for a long period of time. In Africa, during the ages of barter trade, services still existed but they were not valued as they were termed as ‘free services’. For instance, during the barter trade age, there existed medicine people, traditional educators among other service providers (Gancarczyk, 2014). These people...
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...Financial Crisis Will Not Deepen Further Financial crisis occurs when the value of financial institution or asset price drops quickly. (Investopedia US, 2013) Today the world financial system is undergoing economic recession. It is assumed to have begun in the year 2007-2008. After the great depression US economy suffered a short term recession in 2001 but came out with it adequately. It also wide stood dotcom bubble bust, attack by terrorists and accounting scandals. Federal government decreased it rate 11 times from 6.5 in 2000 to 1.7% from the year 2000 in order to increase its liquidity in the economy. A man with no job, no income and no asset was able to afford a house mortgage. This rate was decreased to 1% in June 2003. In 2004 country’s elite banks like Lehman brother, Goldman sacs, Merrill lynch, Morgan & Stanley were relaxed with the net capital requirement 30-40 times. (Sivakumar and Krishnaswami, 2012)But after saturation point problem started rising with the rising interest rates. In 2007 it turned out to be a bad new when federal fund rate reached 5.25% in 2006. Many banks got erupted and with shortage of money. Central banks in several countries like UK, Europe central, Sweden, Canada, Switzerland, china etc help in adding world economy but failed. This economic crisis also exploded the economies of Arab nations, Japan, UK, Ireland, Greece, China etc. The consequences faced by these countries in the meltdown were low GDP, high inflation, low deflation, volatile...
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