The Important Role of Finance in Economic Development

The positive effect of financial development on economic development;

1. Financial development is conducive to the accumulation and concentration of capital, to the realization of modern large-scale production and operation, and to the realization of economies of scale.

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

3. Financial development helps to increase the ratio of savings to financial assets, thus helping to improve the investment level of society.

The role of economic development in financial development;

1. With the development of economy, the income level of society has been continuously improved, thus increasing people's demand for financial investment and wealth management services.

2. With the development of economy, more and more large enterprise groups are formed. These large enterprise groups need modern financial institutions that match their financing needs to provide services for them.

Extended data:

Finance has five elements:

1. Financial object: currency (funds). The currency circulation regulated by the monetary system has the characteristics of prepayment, turnover and appreciation;

2. Financial model: represented by the credit model of lending. The trading objects in the financial market are generally written proof of credit relationship, contract documents of creditor's rights and debts, etc.

Including direct financing: no intermediary intervention; Indirect financing: financing realized through the intermediary role of intermediary institutions.

3. Financial institutions: usually divided into banks and non-bank financial institutions;

4. Financial place: financial market, including capital market, money market, foreign exchange market, insurance market, derivative financial instrument market, etc.

5. System and control mechanism: supervise and control financial activities.

Relationship between elements: Generally speaking, each element is relatively independent and interrelated. Financial objects and financial places are the hardware elements of the financial system, financial methods, systems and supervision mechanisms are the software elements of the financial system, and financial institutions are its comprehensive elements.

Specifically, financial activities generally take credit instruments as the carrier, and through the transaction of credit instruments, they play a role in the financial market, realizing the transfer of the right to use monetary funds, in which the financial system and regulation mechanism play a supervisory and regulatory role.

Baidu Encyclopedia-Financial Development