Relationship Between Financial Development and Economic Development

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TABLE OF CONTENT

1.Title: A RELATIONSHIP BETWEEN FINANCIAL DEVELOPMENT BY PROVIDING LONG TERM INVESTMENTS AND ECONOMIC DEVELOPMENT AS INCREASE IN STANDARD OF LIVING ……………………….Pg.3

2.Abstact…………….......................................................................................Pg.3

3.Introduction………………………………………………………………Pg.3-5

4. Economic Issues and Methods………......................................................Pg.5-6

5. Microeconomics and Microeconomics…………. ……………………...Pg.6-7

6.Economic Growth versus Economic Development…………………..……Pg.8

7.Intensive versus Extensive Economic Growth……………......Pg.8

8.Does Growth create Development……………………………Pg.9

9.What Is Finance,Really?........................................................................Pg.10-11

10.How Finance Works..?....................................................Pg.11-13

11.The Three Main Areas Of Finance………………………...Pg.12

12.The Relationship Between Financial And Economic Development…………………………………………………………….Pg.13-15

13.The Functions of the Financial System and Its’ Effects to Economic Development……………………………………….Pg.16

14.Facilitating Risk Amelioration…………………………Pg.17-18

15.Acquaring Information about Investments and Allocating………………………………………………......Pg.18-19

16.Monitoring Managers And Exerting Corporate Control..Pg.19-20

17.Mobilizing Savings…………………………………......Pg.20-21

18.Facilitating Exchange………………………………………Pg.21

19. Methodology………………………………………………………..Pg.22-23

20. Conclusions………..………………………………...…………........Pg.24-25

21. References …………………….…………………………….…........Pg.26-28

22. Glossary …………….………………………………………...…….Pg.29-31

A RELATIONSHIP BETWEEN FINANCIAL DEVELOPMENT BY PROVIDING LONG TERM INVESTMENTS AND ECONOMIC DEVELOPMENT AS INCREASE IN STANDARD OF LIVING

ABSTRACT:

In today’s global world if everyting( humans life, choices, politics, technology even inter governmental relations) is depend on economics what helps to develop economics and by this way how increase living standards and as a sub-topic of economics how finance plays a role? This paper reviews, appraises, and critiques theoretical and empirical research on the connections between the operation of the financial system and economic development. The empirical literature on finance and development suggests that countries with better developed financial systems experience faster economic development. Financial development - as captured by size, depth, efficiency and reach of financial systems varies sharply around the world, with large differences among countries at similar levels of income. I believe that we will not have a sufficient understanding of long-run economic development until we understand the evolution and functioning of financial systems. This paper argues that a good- functioning financial system is the key factor to occur permanent and healty economic development.

INTRODUCTION

ECONOMISTS hold different opinions regarding the importance of the financial system for economic growth. Walter Bagehot (1873) and John Hicks (1969) argue that it played a critical role in igniting industrialization in England by facilitating the mobilization of capital for “immense works.” Joseph Schumpeter (1912) contends that well-functioning banks spur technological innovation by identifying and funding entrepreneurs with the best chances of successfully implementing innovative products and production processes. In contrast, Joan Robinson (1952, p. 86) declares that “where enterprise leads finance follows.” According to this view, economic development creates demands for particular types of financial arrangements, and the financial system responds automatically to these demands. The inherent functions of financial systems, including mobilising savings to their highest...
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