Sep 6, 2013

Institutions and Investment

What are the characteristics of a favorable investment climate?  
The results in this paper point to the fact that a favorable investment climate is characterized not only by traditional policy areas that can foster private sector investment—such as a stable macroeconomic and regulatory regime, and tax credits favoring business investment—but also by the broader institutional environment in which firms operate, which includes secure property rights and stable rule of law, and by the governance framework, such as adequate control of corruption. In an analogous fashion, policy that seeks to enhance investment financing should probably focus on improving the level of development of the financial sector, as opposed to narrowly-conceived investment credits and incentives. Such well-functioning financial systems are more likely to ensure a superior mobilization and corresponding allocation of saving toward the most productive investment opportunities, and raise the level of investment in the economy overall.
That is from the conclusions of this paper by Jamus Jerome Lim. 

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