FINANCIAL SECTOR DEVELOPMENT 6
FinancialSector Development and the Long-Run Growth:
Thecase of United States 1986-2016
FinancialSector Development and the Long-Run Growth:
Financialmarkets in the United States of America (USA) are the biggest andalso most liquid in the universe. Financial products and serviceshelp in financing and facilitating exports in the USA for bothagricultural and manufactured goods. The financial sector also hasemployed so many people in the USA. Investment in the USA financialsector is advantageous to many commercial firms. In 2012, more than ahundred of Fortune`s Global five hundred companies chose to buildtheir headquarters in the USA. The companies set their base in the USto take advantage of its competitiveness, creative and comprehensivefinancial sector (Bussière & Fratzscher, 2007). The industryoffers a significant collection of financial products and instrumentsto permit consumers to create wealth, manage risks, and meetfinancial needs. There are researches done on the topic of thefinancial sector development and how they affect long-run growth.This paper will first attempt to analyze literature on therelationship between growth and finance. Moreover, analyses on howthe financial sector development has affected the long run growth ofthe USA economy will get achieved.
Researchhas produced an incredible and reliable narrative on the trends infinance. The services offered by the financial body wield afirst-order influence on the long-run growth. Nationsthat have a developed financial structure exhibit ability to growfaster.To be more specific, countries that have bigand privately owned banks can offer credit to small enterprises thathelp in the long-run growth. Also, liquid stock exchanges enable acountry to grow at a fast rate. Financial areas that are functioningwell ease external financing restrictions that hinder industrial andfirm’s developments. Thus, financial sector developments matter alot in growth since they reducethe ability of companieswithout finances to access external capitals and eventually expand.
Inany commercialentity, the majorfocus gets puton expansion and growth. The changes getonly attributedto good developmental plans that getimplementedby the relevant financial institutions. For instance, technology hassignificant impacts on the time factor and the swiftness with whichthe processes involved takes place. Additionally, every inspection ofthe finance-growth link has various distinct procedural inadequaciesthat offer the need to use different methods that have differentstrengths and weaknesses (Reis& Battilossi, 2010).All is intended to draw the most precise interpretations possibleabout the impact of finance on growth. There are various researchesdone by scholars that suggest a positive and healthy relationshipbetween the level of financial sector development and economicgrowth. However, despite the impact of technology, many costs areassociated with evaluating managers, companies, and market conditionsbefore coming up with a decision. Lack of evaluation is even harderto a US citizen who wants to save. The individual cannot be in aposition to collect process and produce any information on interestedinvestments
Econometricmodels are critical for economic focus. They relate various entitiesin a system to come up with qualitative or quantitative ratios.Therefore, the benefiting commercialmodel applies in this research whereby it measures the levels ofsuccess and failures in the economy regardingthetechnologicalchange. Its ability to adapt to any status makes it the mostappropriate model to adopt. Under this model, the projection programshall be used to develop mathematical relationships between financialflow and customer numbers ontechnology. Additionally, using this program, it will help inpredicting the possible changes in the system shortly.Therefore the econometric equation is
E=change in the economy a variable
F=Financialflow a variable
Ct=Changein time with technology a variable
Methodologyand Data Collection
Theresearch will assume a qualitative process. A field work will getconductedso as to get raw data to be analyzed and interpreted. Evidence to beanalyzed will comprise of primary and secondary data which will beused to investigate the research premises and answer questionsregarding financial sector development. Informants will be selectedand get subjected to oral interviews in addition to questionnaires.The respondents will cut across gender, race and class. The age limitwill be twenty-five years. The informants will be selected based ontheir knowledge on financial issues. The study assumes that a hundredrespondents will be enough to check the validity of the informationgiven in trying to reduce repetition.
Theresearch under this case is qualitative in nature, and it puts afocus on the field of finance.Some of the Variables to be measured will be the customer experiencebefore and after the involvement of technology in the financialsector. It is easy to measure this variable by regarding thepractical experience these people have witnessed in the economicstatus. Another variable is the impact on the overall economicstatuswhich getsevaluatedby comparing the past statusand all through the changes to the current status.However, quantitative considerations have to be deliberated on whilecreating econometric contemplations. The considerationsrelate the outlines in the response and quantify the responses inrelation to time. It is possible to relatetime to qualitative systems especially when the questionnaires getbasedon a timeline.
Alot of research and reports on the economic development exist,but their basis focuseson other factors such as customers and organizational approaches.Many researchers have avoided focusing on the impacts that technologyhas had on economic development. By gauging the economicstatus to the rate of technological advancement as discussed in theabove paragraph, it is easy to quantify or carry out a qualitativeanalysis of the impacts. However, the outcomes vary across the worldbecause the rate of development varies. Themethodology used in the researchshould accommodate those variables because they are relevant to thestudy and that is why most of the data sources focus aroundcustomers. The econometric model develops an empirical relationshipbetween customersand financial status.
Bussière,M. & Fratzscher, M. (2007). FinancialOpenness and Growth: The Short-run Gain, Long-run Pain?*. Reviewof International Economics, 16(1),69-95. Retrieved fromhttp://dx.doi.org/10.1111/j.1467-9396.2007.00727.x
Mayer,H. (2010). CatchingUp: The Role of the State Science and Technology Policy in OpenInnovation. EconomicDevelopment Quarterly, 24(3),195-209. Retrieved from http://dx.doi.org/10.1177/0891242410366563
Reis,J., & Battilossi, S. (2010). Stateand financial systems in Europe and the USA.Farnham, Surrey: Ashgate.