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Economics for Management Studies
Melanie Parkin

NAMESTUDENTUTSCECM C48 MidtermDo ALL SIX questionsQuestion 115 MarksANSWER FALSEKing and Levine do argue that financial market development is beneficial to a country in certain ways such as faster economic growth presently and in the future Their research did not directly speak for or against government regulation As such some might argue that King and Levine have nothing to say on this topic but this need not be the case While King and Levine did not argue for government regulation they did not argue against it either In fact while some government regulations may pose an impediment to economic growth such regulations do not impose significant limits on economic growth these regulations work to foster more financial market development That is government regulations are a necessary part of the economy and if they help to create greater domestic financial market development then according to King and Levines research these regulations are beneficial to future economic growth rather than a hindrance Similarly King and Levine do not claim that countries with high levels of financial market development are not open to sudden shocks that can have permanent effects on the economy For example think of the currency crisis that hit East Asia in the late 1990s Government regulations and institutions may help to make a more transparent and accountable economy that while still exposed to such shocks is ultimately impacted by them to a much smaller degree If government is working like this then it is assisting longer term economic growth and future prosperity of the members of the domestic economyThus the claim is false Government regulations are not an evil according to King and Levine that should be eliminated completely They like many others might more reasonably argue for limits on such regulations so that they foster the greater good by assisting rather than limiting domestic financial market development
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