An analysis of the financial institutions and economic development of Kuwait 1965-1985.

摘要

The thesis seeks to consider the extent to which the financial sector of a developing economy can increase economic growth and development. Following the description of the general characteristics of Kuwait's economy in chapter two, the literature on the relationship between finance and economic growth is discussed in chapter three. The implications of this research for the Kuwaiti situation were made explicit. An analysis of the structure and performance of the Kuwait financial system was undertaken in chapters four to seven. The evolution of financial and monetary policy in Kuwait before and after the establishment of the Central Bank is discussed. The activities and operations of commercial banks, specialised credit and non-bank institutions and the role of the Islamic bank are also discussed. This analysis sought to consider whether the operations of the financial system have been consistent with the country's development strategy. An econometric model was then constructed in chapter eight in order to investigate the behaviour of the monetary sector in Kuwait. Of particular importance here was the operation of Euro-dollar markets on such behaviour. The thesis contends that international interest rates have a direct effect upon Kuwaiti financial institutions, which, in turn, influence domestic liquidity and economic growth. A negative and highly significant relationship between the Euro-dollar interest rate variable (ur) and the public demand for money (M2) was found. Ur seems insignificant in affecting demand for narrow money (Ml). The ur variable was also found to be negative and highly significant in affecting the behaviour of time and saving deposits. It is argued that the C.B.K. has been unsuccessful in achieving an effective monetary policy capable of directly influencing financial and economic growth. The C.B.K. has been unable to influence the differential between international and domestic interest rates. The role played by commercial banking has also been under-developed. Greater attention to the development of the agricultural and manufacturing sectors, as well as to financial markets in Kuwait, needs to be undertaken. The financial system must play a more vital role in the country's overall development. These recommendations imply a reduction in the overall dependency on the oil sector in Kuwait.