FINANCIAL DEVELOPMENT IN ARAB COUNTRIES pdf download

Financial Development In Arab Countries by Khaled A. Hussein and M. F. Omran

FINANCIAL DEVELOPMENT IN ARAB COUNTRIES

Financial services are the backbone of modem economies. Financial services constitute a large and growing sector in all economies, developed or developing, alike.

All branches of economic activity today are fundamentally dependent on access to financial services.

 Financial sector fulfils essential functions in intermediating between savers and investors, financing private sector trade and investment, and helping to ensure that the economy’s financial resources are allocated effectively.

The relationship between finance and economic growth has received considerable attention in recent theoretical and empirical literature. 1 McKinnon (1973) and Shaw (1973) argue that financial development is a pre-requisite for economic growth.

They also point out that financial development can affect growth rate positively through its influence on saving and investment.

 The endogenous growth models, for example Bencivenga and Smith 1991, Greenwood and Jovanovic 1991, and King and Levine 1993, provide additional theoretical support to the relationship between financial development and economic performance.

 These models assume that financial intermediaries provide the economy with various sorts of services, such as reducing investment risks (liquidity and productivity risks), collecting information to evaluate alternative investments, and offering better share diversification.

 Such financial services improve the efficiency of investment and its volume.

Endogenous growth models assume that the level of investment and productivity growth are the channels of transmission from financial intermediation to economic growth.

 A healthy and stable financial system, underpinned by sound macroeconom