Remittance is one of the rapidly emerging sources of private capital in

Remittance is one of the rapidly emerging sources of

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prices can be adjusted to changes in prices. Remittance is one of the rapidly emerging sources of private capital in developing countries. As indicated by Ruecker (2011) in 2008, Ethiopia recorded an inward remittance flow of 387 million USD as compared to the outward remittance flow of 21 million USD. Remittances offer a promising and single potential for increasing domestic savings and fostering domestic investment. A developed financial market with a variety of financial instruments will increase the overall attractiveness of Ethiopia as a place for investments, especially for Diaspora. Leads to improved corporate governance and promotion of specialized financial institutions and services Financial market development necessitates the creation of a legal and regulatory framework incorporating increased transparency and information dissemination. It is imperative to consider that establishing financial markets warrants paying due attention for fiscal and regulatory environment, improvement of corporate financial reporting and disclosure, and the promotion of specialized financial services and institutions such as stock brokerage firms, money market firms, investment banks, leasing companies, etc Rewards sound economic policies and create tools to conduct monetary policy In recent decades, a well-developed securities market has been the principal channel through which governments carry out their fiscal and monetary policies to stabilize the economy, avoid hyperinflation, shape the public borrowing and spending plans, growth of jobs, production and pricing of goods and services. If open-market operation is not available, the only effective tools are direct credit controls, ceilings on loans and interest rates, as well as reserve requirement manipulations. Also, deficit financing is carried out by either borrowing directly from the National Bank or by selling bonds to commercial banks. Consequently, deficit financing puts pressure on the money supply and leads to inflationary pressures. As a result, financial repression
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is common in countries with banking-oriented financial systems. Full-scale financial sector reform (liberalization) may be impossible unless the economy has well-developed securities markets (Asrat, 2003). Help in resource allocation In a market economy, issues of securities help raise capital for projects whose outputs are in the highest demand by society, and those enterprises which are most capable of raising productivity. One of the most pressing issues for developing countries is to channel existing scarce resources into productive investment so that they can stimulate productivity, create employment, provide individuals and enterprises with basic utilities, contribute to efficient natural resource management and ultimately maximize overall health of the economy (Dahou, Omar and Pfister, 2009).
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