The paper focuses on the effect of convergence on China and the resultant financial development and economic growth. In the paper, an analysis of the fact that poor countries can catch up to the rich countries through the increase in the average rates was carried on …
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The theory of absolute convergence states that the growth level of countries initially varies due to the difference in their levels of capital. The second theory of conditional convergence states that each country has a steady state and they converge to their own level of the steady state.
The paper focuses on the effect of convergence on China and the resultant financial development and economic growth in this country. Deep-down analysis of the fact that poor countries can catch up to the rich countries through the increase in the average rates of growth has been carried on for a proper understanding of this topic. The investigation of the way in which the financial development and economic growth of China helped it to reach the position equivalent to a developed country is considered for the purpose of review. The Solow swan model and laws of diminishing marginal utility are used to help in the process of interpretation of the topic in a simple and easy manner. The empirical evidence is laid down in the paper along with charts to facilitate the process of understanding.
The idea of catch-up-effect or convergence in economics is based on the hypothesis that the per capita income of the poorer economies will tend to grow at a much faster rate than the richer ones. The resultant factor is the convergence of both the economies in terms of the per capita income. The financial functions control the investment and saving decisions, technological innovations and therefore economic growth (Shahbaz, Khan and Tahir, 2013).
Classical theories: The Ricardian theory of production and growth are related to the law of variable proportion. The law states that if any factor of production is increased while keeping the other same with no technological changes, there can be an increase in the output but in diminishing rate. This increased output eventually approaches towards zero.
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(Macroeconomic Convergence, Financial Development and Economic Growth Coursework)
“Macroeconomic Convergence, Financial Development and Economic Growth Coursework”, n.d. https://studentshare.org/macro-microeconomics/1654055-literature-review.
Macroeconomic convergence, economic growth and financial development.Convergence is a process in which the per capita incomes of the poorer economies tend to grow as fast as that of the richer economies. The process results in the all the economies per capita incomes to converge eventually.
However, same source indicates there are still traces of its past autarkic policies because of the social democratic policies that have governed the country since 1947 to 1991. At that time, the economy was characterized by extensive regulation, slow growth, protectionism, and corruption.
The economies of rapidly emerging countries widely known as BRIC (Brazil, Russia, India and China) have recently become the objects of fascination and speculation for international investors, policy makers, economists and academics worldwide.
The process in which the per capita income of the poor economies tends to grow as fast as that of the rich economies is defined as the convergence. The process eventually leads the per capita incomes to converge. As the developing countries have the advantage of diminishing returns to factors, they can converge faster than the developed economies (Alfaro et al, 2005).
According to the paper, the developing economies have the advantage of diminishing returns to factors, so they can converge faster than developed economies. Convergence depends on various factors such as the speed of capital formation, population growth and the presence of efficient economic policies as well as appropriate financial institutions.
This dramatic post-1978 economic growth has been attributed to numerous global and internal factors. Among the many domestic factors there are new economic policies made by the government, high rates of savings among the common people and government induced opportunities for investments from international firms.
Broadly, this empirical study focussed on the subject of financial development and economic growth. In specific terms, the study will seek to explore the relationship between monetary policies and real estate development. Further, the study will narrow down on the impact of interest rates on the value of residential properties in the Czech Republic (Arner, 2007, p.
The research process will cover a number of stages. The detailed review of literature is performed, to identify the gaps in research a clearer picture of contemporary management practices in the developing countries. The development of the research question was followed by the analysis of the available literature and potential research objects.
The dominant view about growth is explained along with the factors, which cause the relentless phenomenon of growth that we have so far experienced. It explains why humanity should look towards prosperity, which is not going to be measured by the traditional indices of growth.
Economic growth results from the increased production and consumption of a country’s goods and services. Should these goods and services be of the right kind, they benefit the people and thus improve their quality of life and economy. However, economic growth does not necessarily lead to economic development
3 Pages(750 words)Research Paper
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