Chapter 1 begins with a description of a modernday stock exchange and the framework within which it operates. Role of the capital markets as economic growth drivers. Capital market is defined as the market where medium and long terms finance can be raised akingbohungbe, 1996. It is a common postulation that without a functional stock exchange market, the capital market may. All over the world the capital market has played significant roles in national economic growth and development. The zambian capital market is still and remains to be underdeveloped. In capital market, the stock in trade is money which could be raised through various instruments under well governed rules and regulations. In simple words, capital refers to that part of the wealth of an economy which is utilized for further production of wealth. Download this complete banking and finance project material titled. Role and functions of capital market in economic development. The capital market is an effective tool to drive economic development and growth. In this regard, the capital market provides an avenue for the mobilization and utilization of longterm funds for development and hence it is.
It notes both the positive role of stock markets in promoting economic. Efficient capital allocation means that funds are channelled to investment projects. Developing domestic capital markets united nations. A welldeveloped capital market creates a sustainable lowcost distribution mechanism for multiple financial products and services across the country. Long term capital is deemed crucial for economic development as evidenced by the positive. This paper seeks to examine the impact of the nigerian capital market on its economic growth from the period of 19902010. This means that the performance of the stock market is an impetus for. The level of capital market development is an important determinant of a countrys level of savings, efficiency of investment and pace of economic. Abstract virtually all aspects of human endeavor entail the use of money either self generated or borrowed. Significance of capital market for economic development. The role of the capital markets in economic development. As a result of this, the centrality of saving and investment in economic growth has been given considerable attention.
White paper accelerating capital markets development in. The government securities market has grown since the early 1990s when major economic reforms were undertaken. Capital market provides the support of capitalism to the country. The nsf has continued to increase in importance in economic growth and capital market development in the country and indeed the whole of last africa region. What is the role of capital in economic development. The total market value of 299 securities listed on the exchange in 2008 dropped by 28. Like the money market capital market is also very important. One intermediary in the market that operates as a rallying point for the overall activities is the stock exchange market. Bmi expects this to remain the same between 2017 and 2026.
The relationship between financial markets and economic growth has been a subject of great interest and debate among economists for so many years that even up to date researches are still contacting research on this subject. Mirza azizul islam 2006 capital market can play an essential role in enhancing economic development through efficient intermediation of savings into productive investments and in encouraging the expansion of private entrepreneurship dse, 2006. Taking into account the apart role in the market economy, the capital market occupies an important place, through their specific mechanisms, succeeding to give its contribution to the economic. Introduction eariier literature on the development process stressed the importance of capital accumulation, and the role of financial institutions in that process. Capital, although scarce, is needed for the economic development of a country.
The capital market effectively transfers monetary purchase power from surplus funds of investors to those with deficits for a fixed period in exchange for greater future purchasing power. Foreign portfolio equity investments, financial liberalization, and economic development vihang errunza abstract reform of local capital markets and relaxation of capital controls to attract foreign portfolio investments fpis has become an integral part of development strategy. An empirical analysis of stock market performance and. The focus is mainly on capital market development and economic growth. The role of financial markets for economic growth speech delivered by dr. The role of the capital market in the economic development ovidiu stoica abstract taking into account the apart role in the market economy. Role and functions of capital market in economic development 2 years ago 24793 views by francis ladipo the establishment of the nigerian capital market is a significant milestone in the history of our countrys development.
On april 29, the initiative on business and public policy at brookings explored the economic role of capital markets. This writing has sought to demonstrate an important role played by capital market in economic growth and development. The role of capital markets in developing countries econstor. The role of the capital market in the economic development. Taking into account the apart role in the market economy, the capital market occupies an important place, through their specific mechanisms, succeeding to give its contribution to the economic development of the society. Through assets with attractive yields, liquidity and risk characteristics, it encourages saving in financial form. The paper draws on economic theory to assess the role of capital markets in terms of consumption, investment and economic growth. There is sufficient economic literature which reveals that a well functioning financial system increases economic efficiency, investment. What is the role of capital market in economic development. Pdf the role of the capital market in the economic development. Role of capital market in economic development pdf download. Capital market and economic development of a country. Once created, the growth of the capital market mechanism will depend more on the legal and economic environment affecting securities markets rather than the. The demand for long term capital comes mainly from private sector industries and government.
Through the press and different media, the public are informed about the prices of different securities. Pdf capital markets play an important role in the economic development of emerging capital markets. The capital market is a highly specialized and organized financial market and indeed essential agent of economic growth because of its ability to facilitate and mobilize saving and investment. Fifth, a broad and bidirectional opening of capital markets can exert a general positive influence on domestic capital market development. Undoubtedly, capital is the core of economic development.
Despite these important functions, capital markets are often poorly understood. This is due to a number of factors such as equity markets lacking. The impact of the nigerian capital market on economic. Ensuring economic growth and development is a primary objective of all countries. The role of the capital market in the economic development by. The role of the capital market in the economic development ovidiu stoica abstract taking into account the apart role in the market economy, the capital market occupies an important place, through their specific mechanisms, succeeding to give its contribution to the economic development of the society. The wave of economic reforms initiated by the government has influenced the functioning and governance of the capital market. It therefore contributes to the body of existing knowledge by evaluating the contribution of the nigerian capital market to the growth of its economy but specifically looking at the relationships between capital market development. Industrialization is the backbone for economic advancement in any nation, be it capitalist, socialist or a mixed economy. However, in many emerging economies, which currently represent about half of global gross domestic product, capital markets remain underdeveloped or are altogether nonexistent. It plays a significant role in the national economy.
Financial sector development and economic growth in india. But to reap the benefits, policymakers need to actively engage with potential market. Globally, the evolution of capital markets in the last two decades has been dichotomous, in. How tanzania can use capital market to tackle challenges ii this is the second and last part of the two articles that discuss the role of capital markets for our economic development. The role and impact of capital markets in developing. Capital markets play a critical role in economic development by pooling domestic savings and mobilizing foreign capital for productive longterm investment. The major capital market development indicators showed significant improvement when the market contribution to the gdp rose from 27. Examining the role of capital markets in the economy.
Capital formation in the form of domestic capital formation, foreign direct investment andor foreign aid is necessary to increase gross national product gnp. Capital market is the barometer of the economy by which you are able to study the economic conditions of the country and it enables the government to take suitable action. Capital market offers a variety of financial instruments that enable economic agents to pool, price and exchange risk. In an efficient market based economy, the role of the capital market is critical in mobilising resources and channelling them efficiently for productive uses. Pdf the present dissertation attempts to answer to the following questions. Pdf the role of capital markets in economic growth researchgate. Private consumption is the largest contributor to gdp in tanzania. It then summarises debates within economic theory about stock exchanges and economic development. Schumpeter contended that financial development causes economic development that financial markets promote economic growth by funding. Role of capital market in economic development with abstract, chapter 15, references and questionnaire.
The role of stock exchanges in fostering economic growth. This paper stresses the importance of the processes and institutions by which capital is allocated, and the. The capital market contributions towards economic growth and. Therefore, the development of the money market is in all stakeholders interests. Capital market, economic development, regulations, contributions introduction a capital market is a segment of a nation financial system where the main article of trade is medium and longterm financial instruments. A developed, dynamic and vibrant capital market can immensely contribute for speedy economic growth and development.
Considering this role in the economy, the capital markets play an important role in economic development as they facilitate growth in the real sector by giving producers of goods and services, and entities tasked with infrastructure development. What are the necessary conditions for these markets to contribute significantly to economic development of the emerging economies. The role of the stock market in economic development. Role of capital market in economic development business. Stock market performance, economic growth, causality test, shortrun and longrun dynamics 1. They operate in fully developed societies such as in north america and western europe, and in developing countries in africa, asia, the middle east and other world regions. The researchers have presented introduction and investment, role of investment in economic development of the nation, developments in the indian capital markets. Two years into emu organised by the oesterreichische nationalbank in vienna on 31 may 2001. This enables the public to take necessary investment decisions. The role of capital markets in the development of nigerian economy. Role of capital in financial markets and development. It is argued that the macroeconomic policy environment is critical in influencing capital market and hence the extent to which the market. Duisenberg, president of the european central bank, at the economics conference the single financial market. Introduction the relationship between financial sector development and real economic activity has been a debatable issue in theoretical and empirical research.
Rising financial inclusion was attributed to the spread of mobile financial services. This paper title the role of capital market in the industrial development of nigeria is a theoretical discus to ascertain whether the capital market enhance industrial development in nigeria. Financial systems play a crucial role in the economic development of a country. Capital market enhances efficient financial intermediation. The efficiency with which financial markets contribute to economic growth largely depends on the availability of affordable capital and its efficient allocation to productive sectors of the economy. It includes all forms of reproducible wealth utilized directly or indirectly in the production of a large volume of output. This rise will play an important role in strengthening the consumer. How tanzania can use capital market to tackle challenges. Pdf the role of capital markets in economic growth and. This paper is on the operations of the government securities market in zambia. Financial system and economic growth the process of economic development requires as one of its accompanying structural changes in the economy, the development of a capital market which will. In brief, the industrial policy view holds that development banks were formed in response to failures of the capital markets to provide the financing. Taking into account the apart role in the market economy, the capital market occupies. The chilean economic development agency fgi investments guarantee fund bndes.
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