The positive effect of financial development on economic development:

1. Financial development helps to achieve the accumulation and concentration of capital, can help realize modern large-scale production and operations, and achieve economies of scale benefits.

2. Financial development helps to improve the efficiency of resource use, thereby improving social and economic efficiency.

3. Financial development helps to increase the proportion of financial assets used for savings, thus helping to increase the level of social investment.

4. Finance can promote technological progress and attract outstanding talents.

Extended information:

Rule

1. In the process of a country’s economic development, the growth of the financial superstructure is greater than the growth of the national product and national wealth. The economic infrastructure is growing more rapidly, so there is a tendency for the Financial Related Ratio (FIR) to increase.

2. The improvement of a country’s financial-related ratios is not endless. Once a certain stage of development is reached, especially when the FIR reaches between 1 and 1.5 (a level reached in Western Europe and North America in the early 20th century), the ratio will tend to stabilize.

3. The FIR of economically underdeveloped countries is much lower than that of European and North American countries. The current FIR in less developed countries (referring to the 1960s) is mostly between 1 and 2/3, which is equivalent to the level reached and exceeded by the United States and Western Europe in the second half of the 19th century.

4. The main factor that determines the relative size of a country’s financial superstructure is the degree of separation of savings and investment functions between different economic units and different economic groups.

5. In most countries, the share of financial institutions in the issuance and holding of financial assets has greatly increased with economic development. Even if a country's FIRs have stopped growing, the share is still rising.

6. This “institutionalization” trend of savings and financial asset ownership has different impacts on various major financial instruments.

(1) Compared with stocks, the institutionalization of debt is progressing faster; (2) Among bonds, the institutionalization of long-term bonds is more obvious than short-term bonds; (3) Most corporate stocks Directly in the hands of individual shareholders.

7. Everywhere, financial development in the modern sense begins with the development of the banking system and depends on the diffusion of paper money in the economy.

8. With the development of the economy, the proportion of the banking system in the total assets of financial institutions will tend to decline. At the same time, this ratio of various other new financial institutions has increased. .

As a result, in the most economically developed countries, the assets of the banking system (central banks and commercial banks) have become lower than the assets of various other financial institutions combined, but in less developed countries, the opposite is true. .

9. Foreign financing, as a supplement to insufficient domestic funds or as an outlet for domestic surplus funds, has played a major role in most countries at a certain stage of development.

10. For the financial development of most countries, the demonstration role of advanced countries is probably as important as international capital flows. Compared with many other fields, the dissemination of financial technology and management experience is easier, and the overall "transplantation" is more successful.

11. In financially developed countries, financing costs, including interest rates and other charges, are significantly lower than in less developed countries. Occasional exceptions are mainly due to the impact of inflation.

12. In most countries, if we examine recent decades, we will find that there is a roughly parallel relationship between economic and financial development.

Baidu Encyclopedia-Financial Development