Emerging Markets Economies Essay Example | Topics and Well Written Essays - 1500 words

Emerging Markets Economies - Essay Example This paper is based on the writings of Rousseau and Sylla on financial institutions and their role in expansion of trade and economic growth. Lessons which can be learned by emerging economies from the US are presented and described at length within this paper. Moreover the paper discusses the implementation of various models for a sound financial system and description of its role in enhancing expansion of trade and economic growth of emerging markets. It is through a good or sound financial system that rapid economic growth can be realized by emerging market. As a result, emerging economies must put in place a sound public debt and finances system (Rousseau and Sylla, 2001, p. 2). The financial markets are critical in the development of any economy and thus emerging markets must prioritize stabilization of their financial systems. For example, the remarkable growth of the US capital markets and banking systems is attributed to the rapid growth of its economy and acceleration of tra de within the country and internationally (Rousseau and Sylla, 1999, p. 4). This illustrates the role of financial markets in empowering individuals and businesses through provision of credit facilities as capital to enhance their trade. The efforts of the individual businesses in their trade endeavors will in return promote the ultimate economic growth of the economy. Moreover, the confidence and morale of investors is improved when there is availability and access to credit facilities. As a result, the investors will make use of the credit facilities and invest in the economy leading to expansion of trade and the economy in general. Monetary exchanges which characterize trade activities are promoted through a sound financial system. Banks enhance business transactions which are attributed to expansion of trade within emerging markets and thus growth of businesses. Rousseau and Sylla (2001, p. 42) emphasize that expansion of businesses into corporations and their internalization de monstrates a rapid growth of the economy. Rousseau and Sylla (1999, p. 15) reaffirm that the growth in stock of money or liquid money through expansion and increase of bank loans promotes financial development, economic growth and trade. For example, the increased liquid money in the expanded US bank credit boosted foreign investment through investors who were now more confident to invest in the economy. As a result imports were encouraged in addition to the increased application of modern production methods and thus internal economic growth. In this sense, financial are accredited for expansion of a country’s trade into import and export trade. Because of the growth of an emerging market’s trade into international orientations, foreign exchange is attained and hence further growth of the economy. It is the liquid money which finances businesses within an emerging economy Rousseau and Sylla (1999). The rate of exchange of liquid money within an economy demonstrates tha t there is rapidity of trade activities and hence a reflection of an expanding economy. According to Rousseau and Sylla (2001, p. 21), stable monetary arrangements within a country is one of the most important prerequisites to expansion of trade and growth of the economy. Monetary arrangements include policies which govern the financial systems. This means that emerging markets or economies must