I am about to embark on the studies and I need clarification as regards the theoretical background that can be used to anchor the study.
By focusing on monetary behavior, you can detect the direction of the economic value flow on markets, e.g. if investments (liquidity) flow(s) into assets (hoarding) or into productivity (growth).
The volume and velocity of money have their impact on trade and transactions thereby they have direct and indirect impact on economic growth of monetary economy.
Dear Muritala,
In an economy, funds flow through the financial markets. One dimension of that market is money vs. capital market. Another dimension is primary vs. secondary markets.
In primary markets, users raise funds by suppling financial instruments such as stocks and bonds, while in secondary markets those instruments are traded.
Financial market and institutions are necessary for the development and growth of the economy. By their use, the Government can steer the economy via Monetary policies (with or without Fiscal policies) to reach certain targets in GDP growth, inflation rates, and interest rates.
I quite appreciate all the comments rendered by Stephen I. TernyikM Lall B. Ramrattan and Dr. Arjun Yallappa Pangannavar. I will take them on board during the research.
Thanks.
What kind of money market are you thinking of? Is it banking system, securities marker (stocks and bonds), or markets of derivatives? Necessity and impact of each financial market are different for economic growth, depending on the stage of economic development of each countries. If you have no good banking system, you cannot expect that you have the economy which works well. It is necessary to any trade with promissory notes and to make clearing system work. Stock exchange market is preferable, but its running cost is not negligible. For a small country, it is sometimes difficult to have a well working stock market. Markets for derivatives are more difficult and sometimes dangerous, because good working of such markets requires both volume and expertise.
For a developing country, banking policy (of central bank and city banks) is very important. The system has to provide sufficient currency to the economy but should not enhance inflation. Quantity theory of money is no more valid, but it may intrude in the economy through two or three channels: (1) excess wage raise ("excess" means above labor productivity), (2) excess growth of final demand (the growth rate should be under the maximum of material balanced growth rates), and (3) currency devaluation. If there is no such fears, increase of money supply through credit creation has no vicious effects.
Last but not least, economic growth is in its essence non-monetary phenomenon. Even if you have a very good monetary and banking system, you cannot induce economic growth if the real economy has the capacity and the will to grow.
Thanks for the share of knowledge through macroeconomic principles and policies of a right working economy. I quite appreciate that.
As regards the 'money market am referring to'; I am referring to the impact of the money market instruments on economic growth. Are these instruments such as 'Treasury Bills, Treasury Certificate, Certificates of Deposit, Commercial Papers and Bankers’ Acceptances (all as ratios of GDP).
In a well organised banking system, the Central Bank which is the apex bank that regulates the working of the economic and financial system of the economy uses these money market instruments to stimulate the working of the system, therefore, there should be mechanism on its impact on the economy.
Dear Muritala Adewale Taiwo, your headline as a question and the response you had given after Dr. Shiozawa post, inquiring for clarity of your question, is a kind of difficult to decipher exactly the intent of your study, the spirit of your text and what you seek to achieve. I will recommend, you do more reading on the subject to refined the objective of your study and expected result aspired to.
Because with your latter response, there are numerous research papers responding to such question. As i earlier advised, do quality reading to refined your objective of studies.