What is the relationship between financial development and economic growth?

The study of the connection between financial development and economic growth examines the way in which financial development contributes to economic development. One way to view the relationship between financial development and economic growth is access to the way in which human and capital investments can be directed so that they can bring tangible results that can be directed to economic development. In order to effectively direct the resulting productivity towards economic development, intermediaries in the form of financial institutions must usually serve as intermediaries and facilitators.

One way that financial institutions can help in facilitating financial development and economic growth is the collection of savings from individuals and households, which can then be redistributed through the provision of loans or loans. The effect of such a practice is to facilitate the contract for services and goods according to disadvantages, leading to market activities and the resulting economic development. Balance in the economy youIt lines a situation where there is a required balance between the rate of demand in relation to the supply of goods and services by the manufacturer of these products and services. If consumers are able to access the funds for the purchase of such items, the economy will usually benefit from financial activities.

Examples of these activities can be seen if consumers are able to obtain mortgages and other forms of loans and a loan to buy houses, cars and other consumables. The resulting activity on the economic front helps to lubricate the engine of economic progress, thus providing the connection between financial development and economic growth. The same financial institutions can also be used to regulate the economy and avert it from the strength recession and encourage the growth of the required positive attributes. An example is the use of high interest rates as a means to slow down spiral growth in the economy and reduce the sameHo as a means to support growth.

Further link between financial development and economic growth can be observed in the way the financial institutions are able to support economic growth through the direction of the necessary financial resources to identify the most needs. For example, savings and other finances can be collected and redistributed to develop projects that can contribute to the growth of the economy. This can also be strengthened by monitoring loans to ensure that they are used for the required projects.