What is the relationship between banks and economic growth?
Examination of the relationship between banks and economic growth often points to contradictory conclusions based on the abilities of the banking system or inability to stimulate economic growth. Over the years, especially since 1976, several research studies have been conducted to explore this relationship. The results of this research most often conclude that the more developed the banking system in the nation, the more efficient and healthier the economic growth of the nation. Leading economists most often report sound financial reforms, sound legal framework, reliable infrastructure to support the banking system and cautious macroeconomic management and policy as the central for a healthy banking system that helps economic growth. Nations that focus on the development and improvement of these keys are often enjoying consistent economic growth, with economies that usually grow faster. Banking systems
bring five major duties to the economy that relies on the above -mentioned EsightNé leading economists: information production required for allocation of assets and investment; supervise effective administration and management of companies; encouragement of diversification, trading and risk management; Providing a vehicle for savings; and facilitate the exchange of goods and services. Each key area directly relates to uninhibited growth opportunities. For example, healthy financial reforms and transparent legal structure help stop corruption, promoting investments, innovations and lending. As another example, reliable infrastructure makes it easier to produce and disseminate information that is often needed to decide on the allocation of assets or investments.
Macroeconomic policy and decision to manage caution management in relation to macroeconomics is also essential for the development of a sound banking system that supports economic growth. The government that decides, effectively implements and effectively monitors macroeconomicPolitics that support the growth of the financial sector without corruption practices will also strengthen the banking system. While scientists do not always agree on the exact relationship between banks and economic growth, the causality of this relationship is clear that sound banking systems either stimulate economic growth or support investments that result in increased productivity and economic production.
Scientists also discussed mechanisms that solidify the relationship between banks and economic growth; However, evidence suggests that some mechanisms are their own relationship. A policy that effectively reduces financial restrictions helps companies that rely on external financing for advanced projects, which directly link banks and economic growth. Whether the Research Center for Cancer relies on financing, the new corporation relies on investment in its shares or in manplay, relying on the banking system for loan growth, access to capital, and the banking system is the main influencer in T Tan area of the area. This has also been stated, it may represent the differences in economic growth between smaller and larger communities where banking policy may differ significantly, while larger banks reduce the limitation of capital access, while smaller banks in smaller communities can do the opposite to minimize risk exposures.