EC207 Lecture 15: Ch 15 Finance and fiscal policy for development
Document Summary
Ch 15 finance and fiscal policy for development. 15. 1 the role of financial system in econ development. Financial dev causes growth at the start of modern dev, but once financial system is established, it mainly follows real sector. Important about finance (6: providing payment services, matching savers and investors, meet and agree on terms for loans, facilitate matching in an efficient manner. Small-scale savers simply deposit their saving and let the bank decide where to invest: generating and distributing info. Collect info about firms that borrow from them. Info is capital of a bank: financial market as the brain of econ system, allocating credit efficiently, channeling investment funds to uses yielding the highest rate of return. Increases in specialization and division of labour: pricing, pooling and trading risk, protection against risk, diversification. Increasing asset liquidity: easier to sell e. g. stock, investment. Developing countries lack: financial resources highly organized, econ interdependent, efficiently functioning.
