Macroeconomic Convergence, Financial Development and Economic Growth - Coursework Example
The theory of absolute convergence states that the growth level of countries initially varies due to the difference in their levels of capital. The second theory of conditional convergence states that each country has a steady state and they converge to their own level of the steady state.
The paper focuses on the effect of convergence on China and the resultant financial development and economic growth in this country. Deep-down analysis of the fact that poor countries can catch up to the rich countries through the increase in the average rates of growth has been carried on for a proper understanding of this topic. The investigation of the way in which the financial development and economic growth of China helped it to reach the position equivalent to a developed country is considered for the purpose of review. The Solow swan model and laws of diminishing marginal utility are used to help in the process of interpretation of the topic in a simple and easy manner.
