The Role of the Stock Exchange and the Capital Markets in a Country's Development

The stock exchange and capital markets play a major role in a country's development. They allow household funds to be utilized in the development of new businesses, which creates jobs and furthers development.

Features

Capital markets and stock markets provide an efficient means for individuals to invest in a country's businesses.

Significance

Recent observations show a significant link between a country's level of growth and the level of financial development in a country.

Considerations

A stock exchange and capital markets can also provide incentive for foreign direct investment, which can also help a country's economy develop.

Market Benefits

Because of the invisible hand and the interaction of self-interested buyers and sellers, markets can ensure that prices are set at a "fair" market value.

Efficient Capital Allocation

Another benefit is the fact that when a capital market is established, money will be invested in the areas which are most profitable---theoretically providing the most value to a country's citizens.

References

• The Role of Capital Markets in Economic Growth