Even if the evidences shows positive relationship of financial development an economic growth this not totally mean that development in finance will be exogenous to economic growth continuously (Levine 1997). Some developing countries policies regulations during the 1970s and 1980’s period has however being influence by the empirical results, this creates confidence inducing large financial saving in line with the increase in interest rates. Empirical evidence for the growth-finances nexus can be divided into three main types, which are; the cross-country, time series and panel findings. The two types of studies that uses growth equations according to Barro (1991) is the cross country and panel studies. On the other hand time series uses a vector autoregression (VAR) structure or it will uses a single equation-correction method with this said all method of study is vulnerable to limitations. THE CROSS-COUNTRY EVIDENCE ON FINANCE AND GROWTH Goldsmith (1969), was the first to examine the relationship between financial development and economic growth. King and Levine (1993a) examined the relationship over the period of 1960-1989 by using 80 countries data this is done by considering other factors that may affect the growth in the long run. The evidence result was the same with Goldsmith’s (1969 findings). Some studies try to analyse the role of the stock market in promoting economic growth, while King and Levine concentrated at using banking variables to determine level of financial development. Atje and Javanovic (1993) empirical result shows that stock markets have both positive levels and growth effects on activities in the economic, Demirguc-Kut and Maksimovic (1998) including Levine and Zervos (1998) analysis and finding... ... middle of paper ... ...meterization problems, they propose the use of principal component analysis to construct a financial development index using the appropriate financial development indicators. Since Malaysia has more features of a bank-based financial system, only banking variables are used in constructing the index. Contrary to the conventional findings, the results strongly support the view that output growth causes financial development in the long run, but not the hypothesis that a bank-based financial system induces long-term growth in the real sector. In a study that explicitly examines the causal impact of stock market developments on economic growth, Caporale et al. (2005) find strong evidence that stock market development in Malaysia enhances economic growth through raising investment efficiency, which in turn increases the productivity of the economy at the aggregate level.
"Economic Development. (From the Library)." Government Finance Review 17.6 (Dec 2001): 58(1). General OneFile. Gale. Apollo Library. 19 May 2008 ..
This paper will be outlining the theory behind the Endogenous Growth Theory, or EGT, and its comparison to other competing theories. To begin though it is important to clarify that the word endogenous just means to originate from within, or not attributable to any external or environmental factor, so one can assume that this theory relates to growth happening within the region instead of having to depend on external forces for market growth. EGT forces primarily on human capital, innovation, knowledge, and entrepreneurship to be the major contributors to economic growth within a region (Bennett). This innovation is a large part of the EGT, which manifests itself from research and
Economic growth refers to the rate of increase in the total production of goods and services within an economy. Economic growth increases the productivity capacity of an economy, thereby allowing more wants to be satisfied. A growing economy increases employment opportunities, stimulates business enterprise and innovation. A sustained economic growth is fundamental to any nation wishing to raise its standard of living and provide a greater well being for all. Gross domestic product (GDP) is the monetary value of all final goods and services produced over a year. It is the total value of production within the economy. The total value of production is the total value of the final goods or services less the cost of intermediate goods purchased. GDP at market prices (nominal GDP) measures the value of total production at the present price level.
economic growth in Asian countries: Empirical evaluation with a PSTR model. Asian Economic and Financial Review, 6(8), 445-456. Retrieved from Business Source Complete Database.
Economic growth focuses on encouraging firms to invest or encouraging people to save, which in turn creates funds for firms to invest. It runs hand-in-hand with the goal of high employment because in order for firms to be comfortable investing in assets such as plants and equipment, unemployment must be low. Hereby, the people and resources will be available to spur economic growth.
Saudi Arabia’s capital market is considered to be young compared to other financial markets in the region. Saudi financial markets have been developing slowly because most enterprises in the country are either government owned or family-owned, most of which was funded through state budget, and as a result reduced the need for financing. In the recent past, Saudi Arabia has focused on a careful measurement for structural developments and regulatory changes. However, different phases of historical development of the capital market which can be classified into three phases; pre-industrialization phase, post industrialization phase and growth phase that sparked changes and shaped the kingdom 's capital market on
The recent Global Financial Crisis (GFC) initially began with the collapse of credits and financial markets, which caused by the sub-prime mortgage crisis in the US in 2007. The sub-prime mortgages were given to high-risk lenders (with bad credit history) who were in danger of defaulting, which eventually caused a global credit crunch, where the banks were unwilling to lend to each other. In October 2008, the collapse of the major financial institutions and the crash of stock markets marked the peak of this global economic slowdown (Euromonitor International, 2008).
Capital markets are markets "where people, companies, and governments with more funds than they need (because they save some of their income) transfer those funds to people, companies, or governments who have a shortage of funds (because they spend more than their income)" (Woepking, ¶3). The two major capital markets are stock and bond markets. Capital markets promote economic efficiency by moving funds from those who do not have an immediate need for it to those who do. Individuals or companies will put money at risk if the return on the intended investment is greater than the return of holding risk-free assets. An example of this would be those that invest in real estate or purchase stocks and bonds. Those that invest want the stock, bond, or real estate to grow in value or appreciate. An example of this concept would be if an individual or company invested an amount saved over the course of a year. While investing may be riskier, these individuals hope that the investment will yield a greater return than leaving the money in a savings account drawing nominal interest. In this example the companies that issue the stocks or bonds have spending needs that exceed their income so the company will finance their spending needs by issuing securities in the capital markets. This is a method of direct finance because the "companies borrowed directly by issuing securities to investors in the capital markets" (Woepking, ¶5).
It represents a new approach in national development policies and it complements other national policies, such as privatization of basic Malaysia, developed to emphasize the increasing role of the private sector in economic development Malaysia. Approaches is to facilitate the development of nation economy, reduce the financial and administrative burden of government, reduce government intervention in the economy, lowering the level and scope of public expenditure and allow market forces to determine economic activity and improved efficiency and productivity in line with the National Development Policy, with regard to the ownership of wealth, the privatization policy forms part of the Government's strategy to realize the active participation of Bumiputera in corporate sector to correct the imbalances in the participation of the corporate sector. The privatized entity should allocate 30% of its equity to Bumiputera. Participation of foreign nationals in privatized entities are limited to a maximum of 25% of share
Prasad, Eswar S., et al. “Effects of Financial Globalization on Developing Countries: Some Empirical Evidence.” The National Bureau of Economic Research. National Bureau of Economic Research, 2003. Web. 10 Dec. 2013. .
Economic growth is measured by the change in real GDP. Real GDP is the total value of all of the goods and services produced in a year, adjusted for inflation. GDP, though not the best indicator of the quality of life, nations with a high GDP correlate to nations with a higher quality of life. The changes in real GDP for 2013 general trend of increasing GDP and hence increasing economic growth. The latest estimate for fourth quarter fiscal year 2013 is 2.4 percent change in GDP. GDP increased in quarters 1-3 of 2013 but decreased in the fourth quarter. The decrease in the fourth quarter may be problematic for continued economic growth but the general trend of increasing GDP offsets this worry. (see Index 1)
There are at least four different research perspectives about the relationship between development and economic growth. Firstly, economic growth is the basis for social development. Secondly, economic growth and social development are not necessarily linked. Thirdly, both economic growth and social development are not basic causes by each other, but they depend on interaction. Fourthly, social development is the prerequisite for economic growth (Mazumdar. 1...
...t Efficiency and Stock Market Predictability" [Online] Available On: http://www.e-m-h.org/Pesa03.pdf [Accessed On 5 december, 2011].
In order for any country to survive in comparison to another developed country they must be able to grow and sustain a healthy and flourishing economy. This paper is designed to give a detailed insight of economic growth and the sectors that influence economic growth. Economic growth in a country is essential to the reduction of poverty, without such reduction; poverty would continue to increase therefore economic growth is inevitable. Through economic growth, it is also an aid in the reduction of the unemployment rate and it also helps to reduce the budget deficit of the government. Economic growth can also encourage better living standards for all it is citizens because with economic growth there are improvements in the public sectors, educational and healthcare facilities. Through economic growth social spending can also be increased without an increase of taxes.
Economic growth is one of the most important fields in economics. In current generation economic is developing well. Economic growth is really important to country and for the world as well. Economic are one of the identity for country because it shows a country development and attraction for other countries (F, Peter. 2014). For example well economic develop such as Singapore, Dubai, New York, and Japan. These countries are well develop and maintaining their economic growths. Economic growths are really important because higher average incomes enables consumers to enjoy more goods and services. Then, lower unemployment with higher output and positive economic growth firms tend to utilize more workers creating more employment. Enhanced public