Essay - Financial Development and Economic Growth Hypothesis: the United States of...

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Financial Development and Economic Growth


The United States of America has made significant developments with respect to their financial market which in turn has resulted in the form of high economic growth. When we compare the US, which has one of the most developed financial markets, to other less developed countries, we find that the United States accumulates capital and grow at a higher r*****te due to markets being more stable. On the other hand, other lesser developed countries have not made much considerable development with respect to ***** development which in ***** ***** affected their ***** *****th. In this paper we will examine the financial development ***** a less developed country *****nd will measure its effects on its economic growth. For this purpose we will include statistical data to make our point more valid. We will also use ***** of financial ***** such as ***** exchange rate volatilities, stock market size, bank clearings and the economic growth indicators such as GDP and ***** formation data to me*****ure the relationship between financial development ***** ***** growth.

***** the purpose of comparing the financial development and economic growth of the US, we have chosen the Italian economy ***** financial system. We will ***** the GDP ***** rates of both ***** countries and will measure the level of financial development made by both the **********. Finally ***** will examine as ***** whether the economy making higher growth with ***** to ***** development has made higher economic *****? The reason for choosing ***** economy for comparison is that it is a ***** developed financial market as compared to ***** United States.

Financial ***** ***** ***** growth - An overview of p*****t studies:

There ***** been a lot of rese*****rch already done on the issue ***** identifying a relationship ***** financial development and economic *****. The questions like does financial development spurs economic growth? To what extent does higher growth induce a reduction in the incidence of poverty? What can financial development contribute in reducing poverty? are continuously part of the economists debate.

Generally it is believed that Economic growth is simply the result of refraining from current consumption. Within an *****, ********** ***** two general types ***** commodities. One are the consumption goods ********** the others ***** the capital goods. The ***** ***** are for ***** ***** of general consumers use while capital goods are used for production ***** other *****. ***** in an economy there ***** a lesser consumption of ***** ***** by the households, a considerable part of the income is ***** spent *****d the result is in the form of positive net savings. Because of the saving ***** the genera ***** and ********** abstention ***** the purchase of consumption goods, more resources become available for investments. Hence, the household sacrifice their current ***** ***** the sake of *****ir future consumption. From these available resources for investments, firms borrow money ***** their businesses in order ***** invest ***** money in capital goods ***** will in turn add to capital s*****ck


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