HomeDLSU Business & Economics Reviewvol. 4 no. 2 (1991)

Aquino administration, Local Government Code, economic and political destiny, fiscal policy

Eduardo B. Buhain

Discipline: Business and Economics



The development of efficient capital markets wherein surplus units and deficit units of the economy could transact at minimum costs is needed. Moreover, the proper development of the capital market would unify the growing gap between the subjective rate of time preferences of certain groups and the market rate of return. The focus of this paper is on the role of the gap between the subjective rate and the market rate to the overall development of the financial system and eventually to economic development. The link of the said rates to economic development would lie on the linkage of efficient financial markets as a source of scarce funds which could be reallocated to certain growth industries whose gestation periods cover a longer span of time, and the lending preferences of certain surplus units which are subject to a host of financial market distortions. Such distortions aggravate the propensity towards long-term finance and cause portfolio structures of surplus units to reserve a bias for the short term. The minimization of such an incident could spur the wheels of finance to the allocation of said financialized savings to these growth sectors clamoring for funds oriented towards the long-term.