In countries that receive little or no income from resources the relationship between democracy and income is positive and significant. In resource rich countries, the reverse is true: higher incomes bear a negative relationship with democracy (Bates et al.
Economic growth is influenced by several issues. This can be in a positive way, for example with investments by firms which leads to a bigger gross domestic product, or in a negative way, like increasing currency exchange rates which are used when trading with other countries and leads to a lower gross domestic product. Besides these simple examples there are also more difficult factors that can influence growth. One of these difficult factors that can influence economic growth are institutional investors and mutual funds. Economists are not unanimous about the question if the institutional investors affect economic growth in a positive or in a negative way.
Beside the earnings/price ratio, the CAPM had to survive more critique. Banz (1981) and again Basu (1983) discovered that firms with low market capitalization have higher average returns than firms that have large market capitalization. If small firms give a higher return then the CAPM would be suffer another blow. Supporters of the CAPM quickly pointed out that the beta of small firms is usually higher than the beta of large firms. However, this difference in beta is not significant enough to fully explain the different return between small and large caps.
Independent variables Population growth is the rising people in a country. In Malthusian growth model, the increases of population will reduce income per capita. China with 1.4 billion people enjoys the factor endowment namely large labor force but standard of living is low because the increasing of expenditures to improve infrastructure, education, health care and so on. Higher population will result on slower economic growth. So, population growth expected to have negative impact on economic
Inflation causes growth but not vice versa. This article also elaborated on the School of Thoughts, Structuralism View (inflation is a fundamental element of Economic Growth) and Monetarist View (inflation has an ability to determine economic progress). Monetarist View inflation has a positive effect on capital formation and capital information has positive relationship on economic growth. There is a negative relationship between countries like India, Pakistan, Bangladesh, and Sri Lanka. However the negative association between inflation and economic growth has been pointed out in some other countries.
Underdevelopment is a macro-economic term used to describe the underdeveloped countries/economies in the world. Underdevelopment usually suggests unusual potential, i.e, an economy that has not developed as it could, or an economy that has a long way to go in achieving full capacity. An undeveloped country is a country with good prospects for using more capital or more labour, or more available natural resources, or all of these to support its present population to achieve a higher level of living standard. It is important to note that Underdevelopment is a relative concept. It makes sense only by comparison.
It illustrates that whenever the stock market development increases by 1%, ROE will fall by 0.23%. A highly developed non-banking financial sector may apply competitive pressure on the banking sector since it is discussed that there is a positive association between market capitalisation and competition. This coefficient is not significant with a p-value greater than 0.05 and t-ratio higher than 1.96. Financial market does not have so much influence on profitability of banks. 184.108.40.206 Real growth rate For economic growth the coefficient is negative which explain that a fall of 1% in economic growth would result in a reduction of 0.735%.
Foreign Aid and Economic Growth The economic objectives of foreign aid are to induce high growth rates in Less Developing Countries which in turn will generate additional domestic savings and investment. However, there is much dispute as to whether development assistance to poor countries has been successful in achieving these objectives. There have been numerous attempts to investigate the effects of foreign capital in terms of direct foreign investment, and foreign aid and other foreign inflows on developing countries, their results have been conflicting. Aid antagonists like Bauer claim there is a negative causal relationship between aid and growth in less developing countries. This is because aid retards growth by substituting
On the macro front, Hanson (2001) finds no evidence in support of positive spillovers of FDI in the host country. Using micro firm-level data, Gorg and Greenwood (2002) argue that the effects of FDI are predominantly negative. But not all literature criticizes the impact of FDI on economies. Xu (2000); and Borensztein, De Gregorio, and Lee (1998) show that FDI does result in higher economic growth in the host country albeit with a few preconditions. They contend that in order for a host to take advantage of the positive externalities, thereby translating into higher growth, it must possess a minimum stock of human capital.
Though there are long routed conflicting of thoughts on the issue, there isn’t empirical evidence which is conclusive for either of the thoughts. Government expenditure is one of the important determinants of economic growth. However, the growth of an economy depends on the size and capacity of capacity, and how effectively the capital expenditure was utilized in the development process (Sharma 2012). There have been a number of studies that attempt to measure the impact of components of government expenditure on economic growth. These studies have continued to generate a series of debate among scholars.