Financial System Performance and Economic Dynamics

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Indrajit Mallick
Indrajit Mallick

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Financial System Performance and  Economic Dynamics

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Abstract

The firm is the driving force of the economy since the activities of the firms boost aggregate demand as well as aggregate supply but it is the performance of the financial system which facilitates or restricts the activities of the firms. Financial systems allocate resources from savers to investors and since these two groups have different liquidity-risk-return characteristics, financial institutions and financial markets have to issue securities and innovate to bridge the gap. The demand multiplier (together with the investment accelerator) and the credit cycle create a cyclic growth process which needs to be stabilized from context to context through rule based activist monetary policy and regulation when there are fiscal constraints. Inequality and imperfections of financial markets reinforce each other making policy innovations necessary but liberalization of the economy may go a long way in reducing inequality and poverty.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

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No ethics committee approval was required for this article type.

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Not applicable for this article.

How to Cite This Article

Indrajit Mallick. 2020. \u201cFinancial System Performance and Economic Dynamics\u201d. Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 20 (GJMBR Volume 20 Issue B9): .

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Issue Cover
GJMBR Volume 20 Issue B9
Pg. 23- 42
Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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GJMBR-B Classification: JEL Code: D21, D31, D53, E32, E40
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v1.2

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August 22, 2020

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en
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The firm is the driving force of the economy since the activities of the firms boost aggregate demand as well as aggregate supply but it is the performance of the financial system which facilitates or restricts the activities of the firms. Financial systems allocate resources from savers to investors and since these two groups have different liquidity-risk-return characteristics, financial institutions and financial markets have to issue securities and innovate to bridge the gap. The demand multiplier (together with the investment accelerator) and the credit cycle create a cyclic growth process which needs to be stabilized from context to context through rule based activist monetary policy and regulation when there are fiscal constraints. Inequality and imperfections of financial markets reinforce each other making policy innovations necessary but liberalization of the economy may go a long way in reducing inequality and poverty.

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