Direct and indirect effects could happen as the money supply increases; the direct effect being that people will demand more goods and services and the indirect effect being that people will save more money, depositing this in banks (Monetary Policy, n.d.). Therefore, excess reserves will also increase and the banks will be able to lend out more. Banks will motivate borrowing by lowering interest rates and this will increase the demand for investment and consumption and therefore aggregate demand will increase. Businesses respond to increased sales by producing more, thus increasing production. An increase in production would require more labor, thus lowering unemployment, and raises the demand for capital goods.
FDI and the Ecletic Paradigm The increasing globalization has stimulated the appetite of Multi-National Corporation (MNC) to invest abroad while it has also forced the host country to create a more favorable environment for Foreign Direct Investment (FDI) (Chittle, 1999). International trade (exporting and licensing) and FDI (either greenfield investment or Merger and Acquisition (M&A) with an existing firm in the host country) are two important phenomena of globalization for MNC (Buckley, 2015). According to Liu et al. (2016), cross-border M&A is a significant component of FDI, being roughly about one-third of the total FDI flows. The main analytical framework to explain the determinants of FDI is the Eclectic Paradigm or OLI, which attempted
High national debt means that there is little economic growth. The national debt is an issue my generation will face and debt will continue to get larger, this is an important issue and could get smaller with expanding GDP, causing an increase in economic growth and prevent the creation of offshore accounts made by corporations. One way to cut the national debt is to expand GDP, the gross domestic product is the best way to measure the country’s economy. It
If a country’s public savings ratio is less than required investment, then the country will have to borrow more to finance its given rate of economic growth. So like the case with Malaysia, external debt is sourced to achieve the growth rate of the economy, which otherwise would not have been feasible with the given domestic resources. To highlight the motivation behind external debt to the growth-model, the dual-gap theory explains further the savings gap (savings-investment) and foreign exchange gap (import-export). For reasons of national balance of payments accounting, countries can also borrow in the short-term from external sources to finance current account deficits originating from external
Economic The economic conditions of a country play a critical role in the organization’s activities. It is reflected upon how a buyer and seller act in a market. With a boosting economy, the consumer has the power to purchase goods and services, and there is lesser unemployment in the country. During recession, stakeholders could back out from the company. But, during inflation, with high spending power, the company would acquire more stakeholders.
Explain concept of financial intermediation. How does the possibility of financial intermediation increase the efficiency of the financial systems? Financial intermediation is the process by which financial institutions mediate unmatched preferences of borrowers which are Deficit Units and lenders which are Surplus Unit. The Financial intermediaries buy financial claim from a deficit unit and issue the liability to different Surplus Unit, it increases amount of participants
88) concluded that in stimulating productivity, competition play a vital role through new firms, ideas and provoking movements of the market driven by entrepreneurs. This would not have occurred in their absence and growth would not be in the same pace as it is. He also thinks that innovation bustle deconcentrates the market. Acs (1996) stated that one factor for the growth in the employment rate in US is the increase in the rivalry. This reduces economies of scale, increases in import competitions and provided improved structures of vertical integration.
The research has defined two factors to examine whether these drivers are directly affecting the bond issuing of enterprises. The first factor is firm-specific factors such as firm growth, profitability, leverage and so on. The second element is market-specific factors, for instance, larger markets with greater liquidity will encourage firms to issue bonds in order to raise fund. Before starting to do the data collection, the researcher notice two important adjustments to make policy design to be useful in comparing Asian and Latin American debt markets. The first one is to separate the effect of firm-specific on firms’ decision to issue bonds from effect of market growth and liquidity.
respectively during this period. The benefits of economic growth include higher incomes, increased tax revenue for government (which can then be spent on public services like education and healthcare), lower unemployment rate and investments which will encourage a virtuous cycle of economic growth. In order to achieve economic growth, solid and stable policies have to be implemented to maintain a conducive environment for a long term investment in the economy. It has to be constantly re-evaluated to adapt to changing challenges and global events over time. The three most used policies include Fiscal Policy,
IN case of Pakistan where markets and economy are developing so in this case Pakistan is much need of foreign investment. Because of foreign investment Pakistan increases economic growth, Developing and enhancing the managerial skill, employment level, and technology and increase standard of living. Pakistan that is developing country is need that foreign investor wealth come there country. Pakistan develops policies to attract the foreigner investor to increase the GDP, PCI etc. Many benefits of FDI is given below 1.