Financial Development and Banking Control
Economic development is usually accompanied by financial development. Financial development can be defined as an increase in financial intermediation and is reflected in an increased separation between savers and investors. This separation has consequences for the sectoral balances in the economy and for the stability of the economy. The former are affected because net savings and net investment are not necessarily equally distributed between the various sectors of the economy. This increases the scope for discrepancies between planned savings and investments. A system of financial flows, involving financial intermediation, becomes necessary. A means of regulating this system also becomes important in order jointly to satisfy the interests of lenders and borrowers. With economic development, the financial system of a country also grows.
KeywordsInterest Rate Monetary Policy Central Bank Banking System Financial Development
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