Role of Money in a Developing Economy

Abstract

Money plays a vital and all-pervading role in the smooth and efficient functioning of the economic system.  It is not only facilitates the automatic working of the market mechanism, but also provides necessary motivation for economic progress.  Economic development is generally believed to be dependent on the growth of real factors such as capital accumulation, technological progress and increase in quality and skills of labour force.  This view does not adequately stress the role of money in the process of economic development.  Mixed economy, which has been regarded as a golden mean between capitalism and socialism, is a compromise between these two opposite economic systems.  The rational for such a compromise is to integrate the good feature of capitalism and socialism, i.e. to take advantage of the market forces while keeping its bad effects under check.