Arestis, Nissanke, and Stein (2005) conduct an investigative and informative piece where they focus on financial liberalization policy. They suggest that financial crises are unavoidable since they are caused by policies with little utilization of economic development and finance. In their view, the authors believe that flawed theories lead to approaches that later yield to the financial crisis. Notably, this is because economic transformations endanger most banking crises due to the weak foundations of the theory. Therefore, the article mainly seeks to sketch alternative financial theoretical perspectives. They aim to achieve this by examining the elements institutions require to transform and build financial systems for economic development. In other words, the article’s primary contribution centers on financial institutions’ developmental and operational roles. Notably, the authors were mainly after the factors that affect micro-dimensions (Arestis et al., 2005). Generally, this article is essential since it will help transform the higher level by mediating the macro and micro-financial relations in any economy.
The article’s significant findings and analysis indicate that upcoming institutions’ performance mainly depends on formal arrangements. Formal arrangements mainly include fiscal policies, international relations, norms, history, and national ideology. However, informal meetings affect the flexibility of using monetary policies when dealing with unforeseen shocks. Financial transformation interacts with the institutional endowment. The main aim of this transformation is to change the endowments for particular purposes (Arestis et al., 2005). Therefore, history and ideology play a vital role in creating institutional transformation.
On the other hand, interest groups and organizations concentrate people by introducing everyday purposes and rules. In financial systems, the authors found that norms, habits, and methods of thought arising from sanctions were derived from banking patterns. Hence, banking for development must include traditions that foster the extension of time horizons. Incentives focus on penalties and rewards for different modes of behavior. Promotions, legal repercussions, social responsibility, professionalism, and threats of ostracism are some factors shaping banking behavior and decisions.
Further research is required to develop an alternative to the financial liberalization theory. Notably, this is because the authors discovered that the thesis is weak both on empirical and theoretical grounds. Though they have drafted the essentials for the alternative, future researchers need to expound more on the most effective option. The researchers also need to define the theories for developing and developed nations. The authors discovered that there’s a belief in financial systems that centers on retracting state intervention and adjusting price signals. Without further research, such elements will lead to the chaos witnessed in developing nations (Kim et al., 2021).
Nevertheless, future researchers must validate the financial systems by providing their legitimacy requirements. A question that they can answer is whether financial systems are embedded in economic and social production. Also, they can give developmental procedures for the general population to absorb banking norms.
A significant strength of this article is that it provides reliable information. In particular, the researchers have properly prosed their intentions for conducting the study. With this, the readers can easily interpret the meaning of the article. The article is also reliable because it gives definitive results of the study (Kim et al., 2021). A reader can easily understand the main elements of the article. Another strength of the article is realized in its robust and versatile nature. The article must note that it is a great asset in the financial markets. Through this article, countries can develop theories to help raise their economies. Financial institutions can also learn about their legitimacy and how to behave to be absorbed by the general population.
An identifiable weakness of the article is the inaccessibility of some of the data provided in the report. Some of the resources cannot be tracked online. Since this article mainly involved meta-analysis, the reader can question the sincerity of the findings (Lee, 2019). Also, the description of the research method is very vague and unfocused, making its valuation worth very inadequate. The authors are unclear about the research method and design they intend to use. The authors have also yielded a clear-cut and inaccurate procedure since they have not considered their statistical analysis.
References
Arestis, P., Nissanke, M., & Stein, H. (2005). Finance and development: Institutional and policy alternatives to financial liberalization theory. Eastern Economic Journal, 31(2), 245-263
Kim, D. H., Hsieh, J., & Lin, S. C. (2021). Financial liberalization, political institutions, and income inequality. Empirical Economics, 60(3), 1245-1281.
Lee, Y. H. (2019). Strengths and limitations of meta-analysis. Korean Journal of Medicine, 391-395.
