...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 Banks are the main direct providers of liquidity, both through offering demand deposits that can be withdrawn any time and by offering lines of credit.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 management services. Finance allows businesses and households...
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...the role of development finance in economic development in Sub-Saharan Africa. Development Finance is practice of using scarce financial resources in an unconventional ways in order to advance economic activity(ies). According to (Nyembezi, 2009), development finance makes the economy run smoothly and effectively. The aim of the development finance is to look at the challenges and design the framework as well as stimulating core activities that will develop the economic growth. As stated by (Nyembezi, 2009) development finance, in an economy, can be compared to oil in a vehicle engine that ensures its sound and smooth operation. According to (Ocran, 2012), development finance is concerned with the financing of development at: • Household level • Firm level • Geographical area/national/regional level This paper looks at the role of development finance at national and regional level in economic development in Sub-Saharan Africa. The Organisation for Economic Co-operation and Development (2002) defines development finance officially as funding “used in measuring the inflow of resources to recipient countries: including (a) bilateral official development assistance (ODA), (b) grants and concessional and non-concessional development lending by multilateral financial institutions, and (c) Other Official Flows for development purposes (including refinancing Loans) which have too low a Grant Element to qualify as ODA”. The role of development finance and economic growth The...
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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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...Miss Qin. Miss Qin tell us many knowledge of The Central Bank which have caused me to think about it. The Central bank is a special finance organization which be in central position, present a country government to regulate and control finance and the development of economy. Most countries of world have implement central bank system. The Central Bank have a special atrributes determined by it position in national economy. It is the leader and brain of national finance. For the characteristic of The Central Bank's businessl. It have special business object. It business object is government and finance institution, not general people. And it have a special purpose of operation. It's the national government authority. Not for the money but the need of national macroscopic economy. The Central Bank have a series of business privilege. For the fuction of The Central Bank,it stable the development of finance and regulate and control macroscopic economy. With the development of modern economy, the position of The Central Bank have become more and more important. The function of The Central Bank is special also. First, it is issue bank. It is the only bank to issue currency. The power to issue currency is the basic and essential symbol of The Central Bank. The Central Bank will issue currency according to the demand of economy. Regulate and control the gross and circulate of currency. It is important to give the issue power to The Central Bank. It can avoid the...
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...Islamic Finance: A Therapy for Healing the Global Financial Crisis Miranti Kartika Dewi 1 *Researcher of Centre for Islamic Economics and Business ** Lecturer of Department of Accounting Faculty of Economics, University of Indonesia Ilham Reza Ferdian * Student of Master of Science on Finance Programme Kuliyyah of Economics and Management Sciences International Islamic University Malaysia ** Fellow of PT. Bank Muamalat Indonesia ABSTRACT Global financial crisis which hit many too-big-too-fail countries and financial institution in the world was mainly made happen by debt securitization. Derivative instruments resulted from this process obviously were not backed by real asset. When any party came up with investment on these instruments, the investment would never support the development of real sector economy, instead, it just worsen the situation by creating bubble economic. This condition becomes more harmful when the securitized debts default. This practice is strictly forbidden according to Islamic finance principles. It has inherent risk management tools to prevent the crisis. This paper attempts to examine the root of the financial crisis and find the solution from Islamic finance principles. Keywords: Financial crisis, Derivative, MBS, CDO, CDS, Islamic finance 1 Corresponding author can be contacted by email: miranti_k_dewi@yahoo.com. “The credit and capital markets have grown too rapidly...
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...it is important in the economy for corporations and smaller businesses in general as a financial vehicle that allows these entities to finance their ongoing operations and other investment projects by granting access to financing at fixed(generally) interest rates. As such, it is important to understand the bond market in order to understand interest rate fluctuations at which individuals and businesses borrow funds to finance investment and spending. (b)What is a stock? How do stocks affect the economy? (2 Marks) A stock represents a share of ownership in a corporation. It is effectively a claim on the earnings and assets of said corporation. In practice, stocks are a vehicle for corporations to raise funds for financing growth of the corporation. By issuing shares the company can grow its operations by investing the proceeds of the sale of stock into any type of business activity that would expand its potential profits. In practice, stocks are traded on stock markets which can be highly volatile based on the economic conditions in the specific market. Conversely stocks can have a strong effect on the economy one way or another. If companies are generally doing well in an economy, then the stock market is in a state of growth and thus the economy experiences a growth cycle as a result. On the other hand, if companies are performing poorly in a given economy the stock market will experience a period of recession or downturn and thus drag the economy down even further. Of course...
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...Franklin Allen Finance Department The Wharton School University of Pennsylvania allenf@wharton.upenn.edu Rajesh Chakrabarti Finance Area Indian School of Business Hyderabad 500 032, India rajesh_chakrabarti@isb.edu Jun “QJ” Qian Finance Department Carroll School of Management Boston College qianju@bc.edu Sankar De Centre for Analytical Finance Indian School of Business Hyderabad 500 032, India Sankar_De@isb.edu Meijun Qian Finance Department NUS Business School National University of Singapore bizqmj@nus.edu.sg Last Revised: December 2011 Forthcoming, Journal of Financial Intermediation Abstract With extensive cross-country datasets and India firm samples, as well as our own surveys of small and medium firms, we examine the legal and business environments, financing channels, and growth patterns of different types of firms in India. Despite the English common-law origin and a British-style judicial system, Indian firms face weak investor protection in practice and poor institutions characterized by corruption and inefficiency. Alternative finance, including financing from all non-bank, non-market sources, and generally backed by non-legal mechanisms, constitutes the most important form of external finance. Bank loans provide the second most important external financing source. Firms with access to bank or market finance are not associated with higher growth rates. Our results indicate that bank and market finance is not superior to ...
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...How will the Euro crisis affect the economy of China? Table of Contents Introduction...…………………………………………………………………… 2 The formation and evolution of the Euro zone crisis….…………………………3 The serious relationship in trading and investment filed between China and Europe ………………………………………………………….………………………..9 The influence of Euro zone crisis on China economy……..……………………10 Conclusion………………………………………………………………………15 Bibliography………….…………………………………………………………16 How will the Euro crisis affect the economy of China? Many economists now are analyzing the Euro zone crisis. As the biggest trading partner to China, how the Euro zone crisis affects China’s economy cannot be ignored. No matter the decision makers of the enterprises or the decision making department of the government, all need foresight to evaluate the risk and influence of the crisis and prepare the answer before that happens. This paper will provide some analysis and strategic thinking about the influence of the Euro zone crisis on China. Introduction: On August 25th, 2011, the president of France, Nicolas Sarkozy, came to visit China. According to the market prediction, the purpose of his visit was come to further persuade China to purchase European bonds, to support the recovery of Euro zone. The official media of the Chinese government reported that, the chairman Hu at that time expressed two points about China’s attitudes to President Sarkozy. First of all, China cared about the influence...
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...SMEs are very crucial. In addition to developing countries SMEs are important to almost all economies in the world. In many countries, SMEs are the key actors in generating well-brought-up employment in most developing countries involves the expansion of this sector fast enough to absorb people previously unemployed (a few) or engaged in low productivity informal sector jobs and the majority of jobs are provided by SMEs, In low-income countries, especially where the informal sector is large, but it is still significant. The SME sector’s contribution to GDP also confirms its economic importance. In high-income countries,...
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...HISTORY OF FISCAL ADMINISTRATION AND THE THEORY AND PURPOSE OF TAXATION Introduction Fiscal Administration is not difficult to define. In simple terms, fiscal administration is the branch of economics that deals with the revenues and expenditures and their impact on the economy. It is the manner of collecting something from the constituents and spending it also for the constituents. And the exact definition according to http://www.wisegeek.com/what-is-fiscal-administration.htm, fiscal administration is the act of managing incoming and outgoing monetary transactions and budgets for governments, educational institutions, nonprofit organizations, and other public service entities. Constituents charge leaders, whether governmental or organizational, with establishing fiscal policy as part of their duties in relation to responsible fiscal administration. Fiscal policies are tools for the development of fiscal planning budgets, based on the receipt of anticipated funding. As fund disbursement in the form of payroll, purchases, or other expenses occur, management reports appropriate accounting information back to organizational leaders. Historical data, future revenue projections, and current budget demands determine needed adjustments. The entire process forms the basis for future fiscal administration decision making. Leaders of government, nonprofits, and other public service entities have a fiduciary responsibility to those who put them in office, individuals...
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...Introduction to the Global Economy The Global Economy Globalisation – Refers to the integration between different countries and economies and the increased impact of international influences on all aspects of life and economic activity * No longer are economies dominated by local influences but rather through global influences from another countries and economies due to the impact of globalisation. * The aggregate value of all goods and services produced worldwide each year in the global economy is known as gross world economy * The Great depression in the 1930’s and the world wars are examples of international influences on economies in the twentieth century. This also caused trade barriers to arise * The major indicators of integration between economies include: * International trade in goods and services * International trade flows * International investment flows and transnational corporations * Technology, transport and communication * The movement of workers between countries Globalisation * Barriers have been put up to try and protect businesses * Benefits to removing barriers * Barriers have been removed but there are still some barriers that exist * Some say the EU is closing off itself to other countries * Benefits to globalisation: * Trading – we might not have products that are only overseas * Cheaper labour is overseas * Investment overseas and investment into Australia * Financial flows of...
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...G-20 Major economies Project by: Sahib Deol Sec. A Sem. 3 DECLARATION I, Sahib Deol, student of BBA 3nd Semester of SCMS (UG) NOIDA, hereby declare that the Project on “ G-20 Major Economies” is for the partial fulfillment of course objectives for the BBA Degree. I assure that this project is the result of my own efforts and all the information and facts furnished in this Project are based on our intensive study. Date: 15/10/2012 Name:Sahib Deol Place: Noida Introduction The Group of Twenty Finance Ministers and Central Bank Governors (also known as the G-20, G20, and Group of Twenty) is a group of finance ministers and central bank governors from 20 major economies: 19 countries plus the European Union, which is represented by the President of the European Council and by the European Central Bank. The G-20 heads of government or heads of state have also periodically conferred at summits since their initial meeting in 2008. Collectively, the G-20 economies account for more than 80 percent of the gross world product (GWP),00 80 percent of world trade (including EU intra-trade), and two-thirds of the world population. They furthermore account for 84.1 percent and 82.2 percent of the world's economic growth by nominal GDP and GDP (PPP) respectively from the years 2010 to 2016, according to the International Monetary Fund (IMF). The G-20 was proposed by former Canadian Prime Minister Paul Martin[5] as a forum for...
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...Chapter 2: Review Questions 3. Compare and contrast direct finance and indirect finance. Which is more likely to have a larger share of the total financial market in a mature economy? In a young economy? Why? The financial system proposes two ways to finance. The first is direct finance through financial markets and the second is indirect finance through financial intermediaries, like banks finance companies and mutual funds. They both use financial securities and are managed in financial markets. Indirect finance is used more when the financial system is young then when the economy gradually increases it grows to indirect finance, this is so because when the financial system is young it depends on intermediaries. There is less of a risk with indirect finance because the intermediary usually has a firmly set line of credit. Both can cause risks though and they both face different problems with borrowers in difficulty of finance. 4. 5. What is the relationship between the efficiency of a financial system and the rate of economic growth? Financial systems play a huge role in industrializing many in making it easier by the mobilization of capital. “Matching those who have savings with those who want to borrow is the essential purpose of the financial system” (Croushore, 13). The activities consists of money flowing from savers to borrowers and in return borrowers give savers financial securities declaring their repayment. These financial systems encourage...
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...Research Question:- Islamic Finance in Ireland- Prospects and Barriers Introduction:- Islamic finance is relatively small compared to the international financial system, but it is growing rapidly at 15% to 20% annually and expanding very fast due to many factors, increasing in oil prices is an obvious one and the large sum of capital recorded in the books of Islamic institutions. In the last decade Islamic finance started to move into Europe and the USA due to the lack of investment opportunities in the Middle East and the need for its boost to some local economies. In this regard i will try to find out about the emergence of Islamic finance into the Irish financial market and its prospects and barriers. What are the financial benefits for both side and the Irish economy in particular? The trends and prospects for Islamic finance? The barriers to entry into the Irish financial system? Literature Review:- The main topic to be examined is Islamic finance entry to the Irish financial market, particularly the barriers it might face and the prospects and trends. Since Islamic finance and Sharia compliant products are new to Irish market, it is hard to find previous researches about this issue. However, there are quite number of articles focusing on the matter, often written by economists, journalist and concerned people, and there are some reports issued by the like of department of finance, European central bank (ECB) and the Irish Islamic chamber of commerce. Some of the...
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...ISLAMIC FINANCE: CAN IT BE A REMEDY FOR FINANCIAL CRISES? I. INTRODUCTION The financial system is at the heart of the modern economy. When this system works well, it enables to allocate resources that maximize the productivity of the economy. On the contrary when it does not work properly, the whole economy starts to decline. Because financial system must be considered as an in-built part of real economy in terms of credit mechanism. The recent global financial crisis began in August 2007 and after this time it spread gradually to the financial markets in the world. Although it is not severe as in its beginning phase but recovery is not but its aftershock is still going on. There has been numerous research conducted by many economists and analysts. According to the many of these studies, risky transactions, lack of surveillance, and greed that underlie this financial crisis. The relationship between Islamic finance and the financial crises has been discussed by many authors in some of these research. All those works has been done after the beginning of the global financial crisis. Thanks to its strength aspects include risk sharing mechanism, strict Sharia governance rules, tighter supervision and transparency policy, almost all of these works have been concluded that Islamic finance may make significant contributions to prevent financial crises like the current one. Also the reality of the limited impact of the current global financial crisis on Islamic Finance-based institutions...
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