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    Finance and development

     

      In the present crisis scenario, developing countries have to deal with adverse shocks associated with its external exposure: the decline of foreign direct investment; the reduction of exports of goods and services and export prices; the falling price of commodities; restrictions on trade finance; the increase in the cost of credit; and the collapse of remittance flows.

    Trade finance is vulnerable in current framework of uncertainty and instability, a vulnerability that has had serious consequences for trade flows and financing, especially in developing countries, causing a significant financial gap.

    The research of Liberdom has revealed the existence of a positive empirical relationship between trade and finance, as well as both factors with development. The intense financial intermediation is a common trait among the countries that have achieved a higher level of progress, with particular emphasis on the activity of commercial banks as key for development.

    Regarding financial regulation requirements and the elimination of barriers to business, as well as transparency and consumer protection are the categories that differentiate the developed economies of the rest.

    In general, a more advanced stage of development is associated with greater appeal to the banking business, less reliance on domestic financing and the need for financial guarantees and the existence of fewer restrictions to access to finance.

    In relation to microfinance institutions, microcredit is an important factor to fight poverty, but not statistically significant in the analysis of development, a fact that should be taken into account when prioritizing goals and means in the design of development policies.

    You can access the Working Paper of Liberdom VI.2011 through this link:

    DTLiberdom 6 2011 Finanzas y desarrollo (Spanish version)

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