Financial market theory of development
From Wikipedia, the free encyclopedia
Financial market theory of development is an economic theory to use private flows of capital in new stock markets to encourage domestic economic development in developing countries. The theory was put forward by the World Bank's World Development Report for 2000.
This article is written like a personal reflection, personal essay, or argumentative essay that states a Wikipedia editor's personal feelings or presents an original argument about a topic. (June 2022) |
Parts of this article (those related to creating stock markets) need to be updated. (June 2022) |
The theory states foreign investors should have access to "well-regulated" financial markets which would provide the "surest path" to economic development. Businesses in low-income countries would gain direct access to the private capital from industrialized countries. Companies in developing countries would not have to rely on loans or aid that are negotiated through political means and receive capital directly from private investors. This would free capital from exposure to inefficient or corrupt government structures, unleash local entrepreneurial potential and hopefully improve economic growth. Instead of relying on the slow process of domestic capital accumulation, they can sell equity to or borrow from foreign investors and spur economic development faster.
The theory has its criticisms, for example Ajit Singh, Professor Emeritus of economics at Cambridge University, states that stock market development is not an essential progression for the development of a country's financial development. He points out the post-World War II period countries of Germany, Italy, Japan, Korea and Taiwan which were able to industrialize and achieve "economic miracles with little assistance from the stock market"
1960 | Nigeria |
1961 | Taiwan |
1964 | Malaysia |
1966 | Iran |
1968 | Jamaica |
1969 | Ecuador, Tunisia |
1974 | Côte d'Ivoire, Thailand |
1976 | Jordan, Costa Rica |
1977 | Indonesia, Paraguay |
1979 | Bolivia |
1980 | Fiji |
1981 | Trinidad and Tobago |
1984 | Saudi Arabia, Kuwait |
1985 | Iceland |
1987 | Bahrain, Barbados |
1988 | Oman |
1989 | Ghana, Mauritius, Guatemala, Yugoslavia |
1990 | Honduras, China, Soviet Union, Malta, Swaziland, Panama, Hungary |
1991 | Croatia, Poland, Bulgaria |
1992 | Czechoslovakia, Ukraine, Namibia, Lithuania, Mongolia, El Salvador |
1993 | Armenia, Latvia, Bhutan, Cyprus |
1994 | Botswana, Uzbekistan, Nepal |
1995 | Kyrgyz Republic, Malawi, Moldova, Zambia, Macedonia, Romania, Estonia |
1996 | Lebanon |
1997 | Uganda, Kazakhstan, Qatar |
1998 | Tanzania |
1999 | Georgia, Algeria |
2000 | United Arab Emirates, Papua New Guinea, Azerbaijan, Vietnam, Bahamas |
2002 | Maldives |
2003 | Guyana |
2004 | Iraq |
2005 | Cape Verde |
2006 | Suriname |
2007 | Libya |
2009 | Syria |
In preparation as of 2009: Cambodia, Lao, Albania, Afghanistan | |
Source:[1] |