Financial economics 2
Translated by: Mahdi Taqavi,
Azam Ahmadiyan, Neda Bayat
Published by: Ketabkhaneh
The importance of financial markets
development in economics is among the key issues in economy of development. The
possibility and different contexts of investment have been formed with the
development of financial markets and private sector is able to select types of
strategies tailored to its needs for saving in terms of lower risk. Also, it
can increase economic growth by equipping resources obtained from fund savers
and directing them into profitable economic activities with high added value. Therefore,
according to the importance of financial markets issue, it has been tried in
this book to investigate the effect of financial liberalization and financial
repression on different economic macro indicators by using different articles.
Here is a summary of some of the articles:
The impact of change in interest
rate on saving, investment and economic growth as one of the important issue in
development economy has been referred in “saving behavior in low
income and middle income developing countries: a comparison” written by Masao Ogaki, Jonathan Oster and Carmen Reinhart. There
is little consensus in experiences regarding interest rate and savings rate and
their interaction. Some of these experiences have been referred in this
research and finally the researchers want to explore the relationship between
interest rate and savings rate in a model format. A major part of the
relationship between saving rate and real interest rate can be explained
systematically. Experiences strongly confirm that the sensitivity of saving
rate compared to interest rate changes is an increasing function of revenue.
In the “Financing and growth in
bank-based economy: Is it quality or quantity that matters?” article written
by Michel Kotter and Michel Wedow has been explained that most studies have
used financial systems size instead of intermediation quality for explaining
differences in economic growth. This article is a criterion for banks’ intermediation
quality using special type of bank’s efficiency and focusing on special
economic zone like Germany and this criterion has a positive effect on growth.
in bank-based and market-based financial systems: evidence from firm-level
data” has been written by Demirguc-Kunt,
Asl Maksimovic, Vojislav. The authors investigate whether firms’ access to
external financing, to fund growth differs between market-based, and bank-based
financial systems. Using firm-level data for forty countries, they compute the
proportion of firms in each country that relies on external finance, and
examine how that proportion differs across financial systems. They find that
the development of a country's legal system predicts access to external
finance, and that stock markets, and the banking system have different effects
on access to external markets. The development of securities markets is related
more to the availability of long-term financing, whereas the development of the
banking sector is related more to the availability of short-term financing.
They find no evidence, however, that firms’ access to external financing is
predicted by an index of the development of stock markets, relative to the
development of the banking system.
liberalization in developing countries: experimental failures and theoretical
responses” has been
written by Mazooz Mokhtar and Enayat Fatemeh. Many developing countries tested
some of the financial liberalization policies during 1970 to 1980. Governments
like Argentina, Chile and Uruguay released interest rates, decreased foreign
investment and abolished credit management plans. On the other hand, they privatized
commercial banks, facilitated the entry of different national and foreign banks
into domestic bank networks, but the results were against the expectations.
These countries were in a state of financial instability both in the financial
sector and in the non-financial sector.
finance and growth: micro econometrics Evidence on Chinese Firms” is an article written by Alessandra Guariglia, Xiaoxuan Liu, Lina
Song. The effect of liquidity constraints on the growth of firms’ property is
investigated by using more than 79000 Chinese firms during 2000 to 2007.
Findings show that governmental property does not affect growth of properties. Despite
domestic financing growth, necessity of liquidity constraint creates obstacles
for the growth of private sector, particularly in coastal areas. Due to high
efficiency of these firms, if liquidity is directed to them, they can develop