About the Conference:

The Theme of Conference is “Money, Finance and Economic Growth: Emerging Issues”. Economic growth and economic development can be financed through two ways : through internal finance and external finance. Countries grow and develop at different rates. There are various factors which influences the growth e.g. accumulation of savings, natural resources, macroeconomic stability, educational attainment, institutional development, effectiveness of legal system, international trade and even ethical and religious diversities in an economy.

Financial sector includes financial institutions which are using various financial instruments and mobilizing financial resources from savers to investors. Financial intermediaries facilitate in the trading, hedging, diversifying and pooling of risk, efficiently allocating resources, monitoring managers and exerting corporate control, mobilizing savings, and the exchanging goods and services.

Economists emphasize different channels of transmission. Number of studies has dealt with different aspects of the financial sector development and economic growth relationship at both the theoretical and empirical levels. Debate is still going on over the nature and empirical importance of the relationship between financial system and economic development among economists. This concept is still very much in progress theoretically and empirically.

Gurely and Shaw (1955) highlight the importance of financial institutions in the economic growth. Schumpeter (1961) highlights the importance of the intermediary function of financial sector and stresses that access to credit facilitates industrial development. Patrick (1966) identifies two possible patterns in the causal relationship between financial development and economic growth and highlights the demand-following and Supplyleading approaches. Similarly Goldsmith (1969: 398) argues, “Development of a financial superstructure increases the aggregate volume of saving and investment and thus accelerates the rate of economic growth beyond what would have otherwise been, there is no doubt that it results in a different allocation of capital expenditures among within sectors, types of tangible assets, and regions.” McKinnon (1973) and Shaw (1973) state “Financial deepening implies not only higher productivity of capital but also a higher savings rate and therefore, a higher volume of investment.” Greenwood and Jovanovic (1990) demonstrate with the help of theoretical model that the extent of financial intermediation and the rate of economic growth are endogenously determined. Growth and financial structure are inter-linked. Financial intermediation promotes growth because it allows a higher rate of return to be earned on capital, and growth in turn provides the means to implement costly financial structures. Also economists like Bencivenga and Smith (1991), develop an endogenous growth model highlighting the manner in which intermediaries’ shift the composition of savings toward capital, causing intermediation to be growth promoting; in addition, intermediaries generally reduce socially unnecessary capital liquidation, again tending to promote growth. The model thus validates that the development of financial intermediation will increase real growth rates. Gregorio and Guidotti (1992) conclude that the effect of financial intermediation on growth is due mainly to its impact on the productivity of investment, rather than its volume. Further studies emphasize the channel of financial intermediation, an aspect of financial development and economic growth relation, suggesting strongly that the main channel of transmission from financial development to growth is the effect on the efficiency of investment, rather than its level. Berthelemy and Varoudakis (1996), in an endogenous theoretical model claim that the financial sector’s positive influence on capital efficiency and the real sector’s external effect on the financial sector via the volume of savings generate a cumulative process. This study indicates two-way causation between financial sector development and economic growth. Rousseau and Wachtel (1998) demonstrate that a rapidly growing financial system can play a key role in improving both resource allocations and general economic performance. Similar studies by Agu and Chukwu (2008), Antonios (2010), have demonstrated finance and growth relationship. On the contrary, some authors like Robinson (1953:86) do not focus on importance of finance to economic growth “there is a general tendency for the supply of finance to move with the demand for it. But by and large, it seems to be the case that where enterprise leads finance follows”. In such models, financial development is an endogenous variable, and the causality runs from economic growth to financial sector development.

The relationship between financial sector development and economic growth can be analyzed from three angles: financial deepening leading to economic growth, economic growth leading to financial deepening and a bi-directional relationship between the two.

There is a question that who should finance our economic growth? Should the government, or private sector, or should foreigners or emigrants finance the economic growth? Or, should there be a combination of all sources of financing? This conference would intend to bring all those aspects of finance which would contribute to the growth and development of an economy.