Financial markets disparities in developed and developing countries
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Date
2003-09
Authors
Kosimbei, G. K.
Journal Title
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Volume Title
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Abstract
Financial markets are important in the process of economic growth and development in their role in savings mobilization.
Despite the limited range of financial assets available to savers in developing nations, monetarization
ratios are generally lower for such countries than for developed countries. The menu of assets available to private
savers in developing countries from the formal financial system is often limited to cash, demand deposits, time
deposits and sometimes government securities.
Thepaper utilizes granger causality, unit root tests and Ordinary Least squaresregression to estimate the relevance of
monetarization of the economy. Evidence from statistical data shows that causality exists from growth of GDP to
monetarization of the economy, which was the main objective of this study. The unit root test reveals that growth of
GDP is stationary at levels whereas Monetarization ratios are stationary atfirst difference. Theresults are consistent
with economic theory. The major recommendation is that the government should reduce the restrictions on banks,
especially the reserve ratio. This will allow banks to create more credit, and with competition lending rates will
reduce, hence increased investments.
Description
Fourth international conference proceeedings of the association of third world studies, inc. Kenya chapter
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Citation
Disparities in Social Sciences, Politics and Gender, Vol. 1