Developing Functional Networks of Frontier Capital Markets
Technical rept. May 2009-Oct 2011
MILITARY ACADEMY WEST POINT NY NETWORK SCIENCE CENTER (NSC)
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Individuals make economic decisions in a market context that is influenced by their social interactions and opportunities. Examining the structure, dynamics, and unique characteristics of the capital market network in which they operate is vital to understanding how capital markets evolve. Especially in developing economies, individuals make reciprocal exchanges and clan or family interests, social norms, and institutions are as important as individual self-interest. Thus, harnessing the personal, corporate, and information networks that underlie developing capital markets is a critical component for creating programs that expand economic opportunities. Economic research has recognized that well-functioning financial markets are associated with economic growth. However, little is understood about the individual and functional networks in capital markets in the worlds less-developed countries. These capital markets, often termed frontier markets, are ones in which social connections play a much more critical role than in developed capital markets. Vibrant capital markets enable developing economies to attract the domestic and international investment needed to support entrepreneurs and expand economic opportunities. Frontier markets have a smaller scope and fewer institutional controls, and social relations and human behavior have a greater impact. Thus, the study of frontier capital markets provides a unique opportunity to examine the network-based intersection of human behavior and economics. The individual motivations, information availability, transaction systems, and cultural realities in these markets provide a rich context of study. Our research focuses on the capital markets in three frontier markets Ghana, Tanzania, and Trinidad and Tobago. The research team collected extensive resume data about the actors in these markets and used mathematical network analysis techniques to identify and evaluate the agents or nodes in each network.
- Economics and Cost Analysis
- Sociology and Law