Development of Capital Market and its Implications Upon the Economic Development
| Author | Carmen Radu |
| Pages | 386-396 |
Carmen Radu. Lecturer, Ph.D., “Nicolae Titulescu” University, Bucharest (e-mail: lgradu2005@yahoo.co.uk).
Page 386
Our work mainly endorses a comparative study upon the emergent and under development countries which have developed a financial system based on the capital market and of the countries where the financial system has been controlled by banks’ development. The study plays a significant role in researching the consequences related to the place and role of the capital markets within the ensemble of the financial mechanisms. In terms of the place occupied by the capital market within the ensemble of financial mechanisms, we mention that there cannot be drawn a firm border of its range. Thus, the differences between the financial market, capital market and monetary market are entailed by each country’s legal regulations with respect to the financial instruments used, which require distinct features and distinct operators for each individual market.
It is well known that, according to the Anglo-Saxon economic doctrine, the capital market is identical with the securities market and differs from the financial market and monetary market. Thus, the capital market and the monetary market are comprised by the financial market. In such context, the capital market is deemed as being the financial system where international organizations, trading companies and the government may invest substantial amounts of money or may borrow/lend capital; also, natural persons are entitled to make profitable investments on medium and long term.
On the other hand, the monetary market finances the capital needs on short term or keeps the financial surpluses on periods with due dates shorter than one year.
In line with the continental European experts, both the financial market and the monetary market are elements of the capital market. This fact is due to the theory, according to which the capital is divided in physical assets (lucrative technical capital), financial assets (valuable papers which certify the ownership right upon the technical capital) and monetary assets (financial capital). Therefore, the capital market comprises the following elements: the financial market where the issuance, placement and negotiation of securities, is carried out and the financial market, having the role to attract and keep available funds in the company, on medium and short term. ThePage 387 operators, specific for this market, different from those acting on the financial market are the central bank, commercial banks and other financial-banking type institutions. Also, the capital market includes the mortgage market, which operates with financial resources necessary, specially, to the housing construction.
According to the regulations in force in Romania (the law no. 52/1994 and no. 297/2004 regarding the capital market, securities and stock exchanges), the capital market is an element of the financial market. Taking into account the Romanian legislation for this field and its specific operators, the structure of the capital market is as a network of relations, mechanisms and efficient allotment levers of the available financial resources, accessible to the economic agents and the state.
These aspects are researched, relating firstly to the Romanian literature and to the foreign one, which equally comprise the capital market within the financial market and, on the other hand, they see it as a global market arising from the financial and baking markets, such: Anghelache Gabriela, „Bursa si piata extrabursiera”, 2000 or Basno, Cezar August, Nicolae Dobrache, Floricel Constantin – „Moneda, credit, banci”, 1997. The best management of the “capital market” term is meat at Stoica Victor, Galiceanu Mihaela, Ionescu Eduard, - „Piete de capital si burse de valori”, 2001. By means of this approach, its authors get the closest to the foreign literature represented Laporta, Rafael; Lopez-de-Silanes, Florencio; Shleifer, Andrei; and Vishny, Robert W. "Law and Finance," Journal of Political Economy, December 1998, Levine, Ross. “Law, Finance, and Economic Growth”, Journal of Financial Intermediation, January 1999 as well as Demirgüç-Kunt, Asli and Maksimovic, Vojislav. "Law, Finance, and Firm Growth," Journal of Finance, December 1998.
The clarification of this aspect has deep connotations, meaning that we perceive the economic development of a state related to a global financial-banking market in a way and in a different way if we compare the same development with a sector of the financial market.
There is an inseparable liaison between the economic development of each human society and the way that society’s institutions function. Specialists associate economic development with the industrialization level of a country and with the development and modernization degree of that country’s agriculture. Also, economic development is often mistaken for economic growth, although these two terms have a relation similar with the one between entirety – part, such development automatically implying the growth of all economic markers. However, not any economic growth implies development.
The economic growth, in a wide sense, comprises the multitude of quantitative, qualitative and structural transformations occurred within a state’s economic life. Such transformations are followed throughout a long period of time as they follow the ascendant evolution of the agreed economic markers. The compatibility between the results of the economic growth and the social and ecologic ones becomes the essential criterion of economic development. Thus, we may consider that economic development implies the existence of deep mutations within manufacture technologies, within the organizational mechanisms and structure of the economy’s functioning, within the human way of thinking and behavior. Moreover1, a durable economic development is the form or type of development which blends in a harmonious and balanced way the fulfillmentPage 388 of economic growth, the environment protection, social justice and democracy. Therefore, we may, by means of this definition, to deem that there is a series of elements or vectors of the economic growth, such as:
• Re-sizing economic growth taking into account the preservation of natural resources;
• A better satisfaction of needs of work, food, energy, water, housing and medical care for all the inhabitants of a country;
• Preservation and increase of a basis of material and human resources that any state has;
• Technological reorganization and control over its risks;
• Integration of decisions regarding economy and environment within a sole process;
It is understood that these elements and vectors of economic development are generally considered given the existence of major differences according to each country’s particularities and features. That’s why our specialists’ opinions are different regarding the Romanian economic development. On one hand, it is considered that the economic re-launching may be ensured by: macro-stabilization strengthened by reorganizations on microeconomic level; stringent need of investments for the reorganization of existing economic units and stopping of financial indiscipline and granting of non-performing loans. On the other hand, notorious economists deem that the Romanian economic development should “borrow” successful methods from other states’ experience, emphasizing the development of infrastructure, tourism and encouragement of investments in small companies with risk capital. What matters in the purpose of the present paper is the existing liaison between the capital market, as financial institution which may ensure the investments’ increase and how such market helps a country’s economic development.
The capital market, by means of its organization and functioning, has a significant role in the economic development progress. The level of such markets has become a standard of the development level of the emergent countries and under transition towards the market economy. International organizations, such as the World Bank and the...
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