Analyzing the Role of Capital Markets in Driving Economic Development

This project investigates the relationship between capital markets and economic development, examining the role of financial markets and instruments in fostering economic growth. It discusses how developed countries encourage and regulate capital markets, using case studies to support arguments. The research also explores the role of Sharia-compliant capital markets in economic development, highlighting their principles and impact on poverty reduction and financial sector stability. The analysis includes key indicators such as market capitalization, GDP, and foreign investment. The project concludes that well-developed capital markets contribute to higher economic growth and that Sharia-compliant tools can further enhance economic development by increasing output and creating jobs. The study references various academic sources to support its findings.

Do Capital Markets enhance
economic development?

Introduction:
Capital Markets
Significant role is played by the capital markets in
stimulating the economic growth
Effectively direct the flow of investment and savings in the
economy
responsible for providing the equity capital and the
infrastructure capital for raising the socio economic
benefits which are the entry, roads, public transport and
communications.
facilitating the advanced economic performance, job
creations that are foster by the capital markets
enhances the developing countries potential growth and
innovation

Literature review:
1952 Markowitz projected the combination theory of
investment. The modern capital market theory is obtained
from the capital market analyzation (Setiawan, 2010). .
Many theorists argued that the capital markets expansion
may have the positive impact on the growth of the economy
economic intermediation influence expansion through the
certain channels such as; it can augment the marginal
efficiency of capital by accumulating information to assess
another investment assignments and also through risk
sharing; secondly can lift savings proportions channelled to
savings through economic growth (Setiawan, 2010).

Literature review:
economic intermediation influence expansion
through the certain channels such as;
 it can augment the marginal efficiency of
capital by accumulating information to assess
another (Setiawan, 2010).. investment
assignments and also through risk sharing;
secondly can lift savings proportions
channelled to savings through economic
growth (Setiawan, 2010).

Developed countries
Countries such as Ghana, Egypt, Botswana,
Tanzania, and Mauritius, where the capital
markets have been recently developing, realizes
the average per capita development rates of
2.8% and more from the last eight years
(Clayton Johnson, 2008).
Uganda and Swaziland is not able to realize and
manage the average per capita development
rates above 2.7 % (Clayton Johnson, 2008).

Sharia compliant capita markets
Sharia compliant capital markets apparently
hinges on the three basic principles that are
the interest ban, truthfulness in the business
and wealth tax (Effendi, 2018).
Sharia compliant capital markets work on
reducing the poverty, increasing the growth
of the financial sector, growing contact to
finance, structuring the stability of the
financial sector and flexibility in client nations
(Effendi, 2018).

Sharia compliant capita markets
capital markets benefits in the three areas
tumbling poverty
encouragement mutual prosperity
economic growth
undeviating link to the real economy and
physical assets (Dumitriu & Stefanescu,
2016).

Economic development
capital market growth indicators:
market capitalization
gross domestic products
foreign private investment
gross capital formation
Shares traded

Conclusion:
the capital markets that are well-developed
experience the economic growth higher
Shariah-Compliant Socio-Economic tools of
the capital markets resulted in the economic
development with an increase in an output
and creating jobs (Dumitriu & Stefanescu,
2016). .

Reference
Setiawan, K. (2010). Do Emerging Capital Markets Move
Toward the World Integrated Market? A Study on
Comovement of Returns between Emerging Capital Markets
in Asia and Developed Capital Markets. SSRN Electronic
Journal, 2(4), 9-10.
Clayton Johnson, W. (2008). Recent SEC initiatives that should
enhance access to the US capital markets by foreign private
issuers. Capital Markets Law Journal, 3(4), 389-416.
Dumitriu, R., & Stefanescu, R. (2016). Impact of the NYSE
Shocks on the European Developed Capital Markets. SSRN
Electronic Journal 2(1), 5-6.
Effendi, J. (2018). The determinant of equity financing in
sharia banking and sharia business units. Economic Journal Of
Emerging Markets, 10(1), 111-120.