We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
Cambodian Economy from PART II - MACROECONOMIC FRAMEWORK
Published online by Cambridge University Press: 21 October 2015
The degree of development of the financial sector is a sound indicator of long-term economic growth. Jalian and Kirpatrick (2005) showed that even for developing countries, improved financial systems speed up the pace of per capita productivity and production growth as they channel the resources of society toward fruitful activities that translate into productivity gains.
Rioja and Valev (2004) point out that the intensification of financial intermediation will undoubtedly have an impact on growth if banks reach a certain level of development measured by private credit/GDP ratio of at least 14%.
There is a strong correlation between a healthy financial sector and economic growth due to the positive effects the former has on private savings and resource allocation. The State has a major role to play in encouraging the development of institutions involved in long- term financing, specialized institutions, and supporting instruments suited to particular types of needs. The measures expected from the State largely involve improving the regulatory and legal framework (competition, prudential rules, tax system, interest rates, credit and recovery law, etc.).
Nevertheless, stringent regulations often hobble development of the banking system in developing countries. Financial repression (Agénor and Montiel, 1999) arises when banks are required to maintain high ratios of mandatory liquidity and reserves. When combined with legal and institutional gaps, such controls are considered as a major cause of underdevelopment in the financial sector. These gaps involve: (i) information on borrowers; (ii) exercise of property rights; and (iii) guarantees and land registry.
Background
Low public confidence in the banking sector and its limited role in financial intermediation have resulted from the civil war and political upheaval that prevailed over the last three decades. After achieving independence in 1953, Cambodia's economy showed robust growth for a decade until the introduction of a planned economy policy in the 1960s, with the banking and foreign trade sector being nationalized in 1963.
To save this book to your Kindle, first ensure [email protected] is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.
Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.
Find out more about the Kindle Personal Document Service.
To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.
To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.