Question

Discuss the cross-country evidence of financial development/ structure in relation to economic growth.

1. Mexico vs Brazil.

2. German vs U.K.

3. German vs U.S.

4. Japan vs U.S.

Answer 1

a) Mexico vs Brazil have been on the rivalry path for ages now Brazil economy has turned bearish and is going through structural reforms towards education , energy attracting investors with black market composition in BBrazil than Mexico which means financial market needs efficiency both in human and physical capital. Mexico has had a better financial market position with a saving rate of 23.6% of gdp vs only 17.3 % for mexico higher consumption in brazil and has a high bank credit penetration rate with more public policies trying to improve loan policies. Mexico has an advantage over brazil in terms of ease of doing business and the country has more flexible and beter trade policies giving a better position for economic growth and development.

b) Germany vs UK

Germany has had an economic growth after the euro crisis with a modest external borrowing by the government Uk has a high trade deficit because reliance of its relation with europe , germany continued exporting highly with specialisation in manfacturing .The financial structure is more sound for germany compared to Uk right after the BREXIT making its situation even more volatile.

c) Japan vs US

US has a converging gdp growth rate and trying to adopt financial structure like that of japan with a high inflation rate the gdp growth rate is being impacted in comparison to a stable economic growth of japanese economy.The economic performance has been strong for japan with impressive growth in terms of living standards and maintaing its population growth to ensure sustainability of financial and capital growth and focusing on long term economic growth for japan.