Economic Growth and Its Stimulating Factors

By

ACKNOWLEDGEMENT

Very special thanks to Mathew Shade at the Economic Research Service for his support and advises on various data sets and sources. http://www.ers.usda.gov/Data/macroeconomics/.

Also I would like to thank my supervisor for supporting myself throughout my project and giving his valuable suggestions as well as inspire me. Finally I would like to say thanks to my family and my partner who were always there for me, with their strong support and dedicated inspiration.

DECLARATION

I, (Your name), would like to declare that all contents included in this dissertation stand for my individual work without any aid, & this dissertation has not been submitted for any examination at academic as well as professional level previously. It also represents my own views & not essentially the ones associated with university.

Signed __________________ Date _________________

ABSTRACT

The research study highlights different aspects of the economic growth and discusses the factors that can help in stimulating the economic growth within the country. The present study has taken into account factors that play an important role in enhancing the economic growth. The economic growth was first theorized in detail by the Classical School of political economy, whose motivation was the development of a scientific understanding of the forces affecting the development of industrial capitalism in Britain and other industrializing economies. The Classical School identified the accumulation and productive investment of capital as the principal source of economic growth. The rate of surplus generated by an economy and its distribution between investment and rent would therefore be a key determinant of the rate of growth of an economy. The research study has particularly focus on the role of finance and financial intermediation on economic growth, among other factors. It has also briefly discussed the historical perspectives of the role of finance in economic development for example state ownership of the banks. Some empirical evidence on the economic growth has also been collected in order to prove the hypothesis of the research study. The research study has identified two research hypotheses for which the regression analysis has been done. In the regression analysis, the GDP per capital for the year 2009 has been considered as the dependent variable while unemployment, HIV, state ownership of the banks, life expectancy, school enrollment ration etc have been considered as the independent variables that affect the GDP per capita within the economy.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 1: INTRODUCTION1

Background of the Research study1

Aims and Objectives2

Problem Statement3

Significance of the research study3

Rationale of the research study4

Structure of Dissertation6

Chapter II6

Chapter III6

Chapter IV7

Chapter V7

Chapter VI7

Research Questions8

CHAPTER 2: LITERATURE REVIEW9

Process of Economic Growth9

Neo-Classical Growth Theory10

Growth Models to be Analyzed11

Neo-Classical Production Function11

Steady-State Growth in Neo-Classical Model12

Neo-Classical Growth Model with Money12

Economic Growth and Inequality12

State ownership of the Financial Institutions13

Role of Finance in the Economic Growth14

Role of Financial Intermediation in Economic Growth15

Banks: the Core of the Modern Economy15

Review of Empirical Study16

CHAPTER 3: METHODOLOGY17

Research Design18

Rationale for a Quantitative Study18

First Model19

Second Model19

Third Model19

Fourth Model20

Fifth Model20

Statistical Summary of Key Variables21

CHAPTER 4: DATA AND SOURCES24

Hypothesis 124

Hypothesis 224

Growth Models to be analyzed26

Neo-Classical Production Function27

Steady-State Growth in Neo-Classical ...