Below is an essay on "Financial Sector Reforms" from Anti Essays, your source for research papers, essays, and term paper examples.
Shaw (1973) posits that distortions of financial prices, including interest rates and foreign exchange rates reduce the real rate of growth and the size of the financial system relative to the non-financial magnitudes. In all cases this strategy has stopped or gravely retarded the development process. The stunted growth of several developing economies including Ghana’s is part of the evidence, which give credence to this assertion.
Coming to terms with this fact, many developing countries, in the 1980s decided to reconsider their financial approach to development. Although countries differ in the scale of government intervention and the extent to which they have already stabilized and structured their economies, most have decided to rely more upon the private sector and market signals to direct the allocation of resources. To obtain all the benefits of a greater reliance on voluntary, market-based decision-making, they need efficient financial systems.
A financial system provides services that are essential in a modern economy. The use of a stable widely accepted medium of exchange reduces the costs of transactions. It facilitates trade and therefore, specialization in production.
Financial assets with attractive yield, liquidity, and risk characteristics, encourage saving in financial forms. By evaluating alternative investments and monitoring the activities of borrowers, financial intermediaries increase the efficiency of resource use. Access to a variety of financial instruments enables economic agents to pool, price, and exchange risk. Trade, the efficient use of resources, saving, and risk taking, are the corner stones of a growing economy.
Financial services make it cheaper and less risky to trade goods and services and to borrow and lend. Without them, an economy would be confined to self-sufficiency or barter, which would inhibit the specialization in production upon which modern economies...