Application of the New Growth Theory to Financial Risk Management

Abstract

The aim of this research was to look at certain trends in the New Growth Theory. A literature search study was done with the purpose of establishing linkages between the New Growth Theory on Financial Risk Management and other aspects of financial impacts. The findings indicate that economic development policy is affected in a number of ways by the New Growth Theory. This may include the generation of new knowledge, which is crucial for growth sustenance brought about by increasing demand for production due to an increase in the needs and wants of the population. All of the elements that encourage the formation of new knowledge, including research and development, the educational system, and entrepreneurship, require careful consideration on the part of policymakers. By attributing production growth to externalities produced by investments in human capital and technology, the new growth theory endogenizes the drivers of growth; some variations also incorporate policy variables. The new growth theories warn against overprotecting intellectual property rights, but they also suggest that in a situation where there is a significant and expanding information gap between wealthy and developing nations, some trade restrictions may be justifiable. The New Growth Theory is significantly correlated with the value of human capital, quality education, new knowledge, and the government's provision of incentives for the private sector's research and development (R&D).