In an open economy, the theory of financial deepening and financial development

Author: Qiao Zongming
Publisher:
Publish Date: 2006-09-01
Features: Based on an analysis of traditional financial deepening theory, this book proposes and thoroughly argues for an open financial deepening theory by drawing on financial function theory. Guided by this theory, it examines financial risks during the process of financial deepening, strategic financial development policies for developing countries, and key issues in China's current financial development. Drawing on bank and monetary crisis theories, the book studies the formation patterns of financial risks during financial deepening and their relationship with financial deepening. It points out that the main reasons for increasing financial risks are the one-sided implementation of financial deepening measures and the lack of coordination among financial deepening policies. Continuing financial deepening is the best choice for addressing financial crises. The discussion on strategic financial development policies for developing countries constitutes the policy implications of the open financial deepening theory. Strategic financial development policies refer to the implementation of financial deepening-oriented policies, which are market-oriented and internationalized, emphasizing the deepening of the financial structure and institutional building. They are based on domestic financial deepening and promote it through financial internationalization. The externalities of the financial sector, financial fragility, and the pressures of financial openness determine the necessity of the government formulating strategic financial policies. The open financial deepening theory provides valuable insights for correctly understanding and addressing relevant issues in China's financial deepening and development.