when we r ther in University .....we thought a theory named as crowding out effectit describe a situation happen , when the government start to borrow from the private sector,which result shortage of funds for the private investor. currently we r observing this scenario in our country,, our government imposed 27% bill purchase for each loan and advance made by the private banks.....the government collect the money to regulate the economy in one side and also to finance Mega projects in other side.However this regulation created big challenge for commercial banks, in short banks has to mobilise 127Birr deposit to finance 100Birr loan application this directly affected funding capacity of private banks,currently most of private banks seized sanctioning further loans due to fund shortage(liquidity) problem. as we all now loans made by private banks directly affect investment activity by the private investors,,...as the loan and advance start to slow ,,,the investment also goes down. from this its possible to conclude that.....the theory of crowding out effect has a real sense beyond theory
Posted on: Mon, 22 Dec 2014 15:26:35 +0000