Showing papers on "Financial sector development published in 2000"
TL;DR: In this article, the authors evaluate whether the level of development of financial intermediaries exerts a casual influence on economic growth and whether cross-country differences in legal and accounting systems (such as creditor rights, contract enforcement, and accounting standards) explain differences in financial development.
3,591 citations
TL;DR: In this article, the authors evaluate whether the level of development in the banking sector exerts a causal impact on economic growth and its sources-total factor productivity growth, physical capital accumulation, and private saving.
2,634 citations
Posted Content•
TL;DR: This paper provided a selective review of the literature, as well as new empirical evidence on the relationship between financial development and economic growth for a large cross-section sample of countries and found that the effect of financial development on growth is positive.
Abstract: In recent years there has been substantial theoretical and empirical work on the role that financial markets play in fostering economic growth and development. This paper provides a selective review of the literature, as well as new empirical evidence on the relationship between financial development and economic growth for a large cross-section sample of countries. While the results indicate that the effect of financial development on growth is positive, the size of the effect varies with different indicators of financial development, estimation method, data frequency, and the functional form of the relationship.
224 citations
01 Jan 2000
TL;DR: In this article, the causal relationship between financial development and economic growth in Turkey was examined and five alternative proxies for financial development were developed and Granger causality tests applied using the cointegration and vector error correction methodology (VECM).
Abstract: This paper examines the causal relationship between financial development and economic growth in Turkey. Five alternative proxies for financial development are developed and Granger causality tests applied using the cointegration and vector error correction methodology (VECM). The empirical results show that the direction of causality between financial development and economic growth in Turkey is sensitive to the choice of proxy used for financial development. For example, when financial development is measured by the money to income ratio the direction of causality runs from financial development to economic growth, but when the bank deposits, private credit and domestic credit ratios are alternatively used to proxy financial development, growth is found to lead financial development. On balance, however, for Turkey, growth seems to lead financial sector development.
160 citations
TL;DR: An assessment of how e-finance, and globalization more generally, affects countries highlights the need for changes in four financial sector policy areas—safety and soundness, competition policy, consumer and investor protection, and global public policies—to mitigate risks and reap as much as possible the potential benefits of e-Finance.
Abstract: Because financial services are highly dependent on technology and well-suited to remote delivery, technological advances and the advent of the Internet are causing dramatic changes in the industry. This revolution could accelerate financial sector development by lowering the costs, increasing the breadth and quality, and widening access to financial services. This paper analyses the changes in the industry and their implications for public policy. It finds that, over the long term, there will be an opportunity to reduce the financial sector safety net and correspondingly prudential regulation and supervision. Over the short term, authorities should be wary to extend the safety net. In addition, competition policy, consumer protection, and consumer education will become more important. Though these issues are more advanced in developed countries, they are quickly becoming more relevant in emerging markets.
122 citations
TL;DR: This paper used industry-level data on firms' dependence on external finance for 36 industries and 56 countries to examine this question and showed that countries with better-developed financial systems have higher export shares and trade balances in industries that use more external finance.
Abstract: Does financial development translate into a comparative advantage in industries that use more external finance? The author uses industry-level data on firms' dependence on external finance for 36 industries and 56 countries to examine this question. The author shows that countries with better-developed financial systems have higher export shares and trade balances in industries that use more external finance. These results are robust to the use of alternative measures of external dependence and financial development and are not due to reverse causality or simultaneity bias.
119 citations
01 Jan 2000
TL;DR: In this paper, the authors set forth a framework for thinking about growth volatility which is general enough to incorporate the important structural, institutional, and policy variations among countries which might account for differences in their macroeconomic performance.
Abstract: This paper sets forth a framework for thinking about growth volatility which is general enough to incorporate the important structural, institutional, and policy variations among countries which might account for differences in their macroeconomic performance. The paper focuses particularly on the role of the financial sector. The paper discusses the importance of short run dynamic effects in determining long run outcomes, and the role of the financial sector, elements which to date, have not been sufficiently incorporated in traditional macroeconomic analysis. The authors investigate the data, which reveal aspects of the determinants of volatility, namely the importance of the financial sector.
92 citations
Posted Content•
TL;DR: In this paper, the authors investigate how corporate sectors' financial and operating structures relate to the institutional environment in which they operate, using data for more than 11,000 firms in 46 countries.
Abstract: Corporate financing patterns around the world reflect countries' institutional environments. Weaknesses in the corporate sector have increasingly been cited as important factors in financial crises in both emerging markets and industrial countries. Analysts have pointed to weak corporate performance and risky financing patterns as major causes of the East Asian financial crisis. And some have argued that company balance sheet problems may also have played a role, independent of macroeconomic or other weaknesses, including poor corporate sector performance. But little is known about the empirical importance of firm financing choices in predicting and explaining financial instability. Firm financing patterns have long been studied by the corporate finance literature. Financing patterns have traditionally been analyzed in the Modigliani-Miller framework, expanded to incorporate taxes and bankruptcy costs. More recently, asymmetric information issues have drawn attention to agency costs and their impact on firm financing choices. There is also an important literature relating financing patterns to firm performance and governance. Several recent studies have focused on identifying systematic cross-country differences in firm financing patterns - and the effects of these differences on financial sector development and economic growth. They have also examined the causes of different financing patterns, particularly countries' legal and institutional environments. The literature has devoted little attention to corporate sector risk characteristics, however, aside from leverage and debt maturity considerations. Even these measures have been the subject of few empirical investigations, mainly because of a paucity of data on corporate sectors around the world. Building on data that have recently become available, Claessens, Djankov, and Nenova try to fill this gap in the literature and shed light on the risk characteristics of corporate sectors around the world. They investigate how corporate sectors' financial and operating structures relate to the institutional environment in which they operate, using data for more than 11,000 firms in 46 countries. They show that: - The origins of a country's laws, the strength of its equity and creditor rights, and the nature of its financial system can account for the degree of corporate risk-taking. - In particular, corporations in common law countries and market-based financial systems have less risky financing patterns. - Stronger protection of equity and creditor rights is also associated with less financial risk. This paper - a product of the Financial Sector Strategy and Policy Group, Financial Sector Vice Presidency - is part of a larger effort in the Bank to study the determinants of the riskiness of countries' corporate and financial systems.
87 citations
Posted Content•
TL;DR: In this article, the authors investigated how corporate sectors' financial and operating structures relate to the institutional environment in which they operate, using data for more than 11,000 firms in 46 countries.
Abstract: Weaknesses in the corporate sector have increasingly been cited as important factors in financial crises in both emerging markets and industrial countries. Analysts have pointed to weak corporate performance and risky financing patterns as major causes of the East Asian financial crisis. And some have argued that company balance sheet problems may also have played a role, independent of macroeconomic or other weaknesses, including poor corporate sector performance. But little is known about the empirical importance of firm financing choices in predicting and explaining financial instability. Firm financing patterns have long been studied by the corporate finance literature. Financing patterns have traditionally been analyzed in the Modigliani-Miller framework, expanded to incorporate taxes and bankruptcy costs. More recently, asymmetric information issues have drawn attention to agency costs and their impact on firm financing choices. There is also an important literature relating financing patterns to firm performance and governance. Several recent studies have focused on identifying systematic cross-country differences in firm financing patterns - and the effects of these differences on financial sector development and economic growth. They have also examined the causes of different financing patterns, particularly countries'legal and institutional environments. The literature has devoted little attention to corporate sector risk characteristics, however, aside from leverage and debt maturity considerations. Even these measures have been the subject of few empirical investigations, mainly because of a paucity of data on corporate sectors around the world. Building on data that have recently become available, the authors try to fill this gap in the literature and shed light on the risk characteristics of corporate sectors around the world. They investigate how corporate sectors'financial and operating structures relate to the institutional environment in which they operate, using data for more than 11,000 firms in 46 countries. They show that: 1) the origins of a country's laws, the strength of its equity and creditor rights, and the nature of its financial system can account for the degree of corporate risk-taking. 2) In particular, corporations in common law countries and market-based financial systems have less risky financing patterns. 3) Stronger protection of equity and creditor rights is also associated with less financial risk.
66 citations
Book•
02 Nov 2000
TL;DR: In this article, the authors examine the commercialization of the rural economy and the provision and use of rural financial services since the 1970s, and they are intended for policy makers and students of economics, agricultural science, and Asian studies.
Abstract: This work specifically examines the commercialization of the rural economy and the provision and use of rural financial services since the 1970s. It is intended for policy makers and students of economics, agricultural science, and Asian studies.
60 citations
TL;DR: In this paper, the authors examine the contribution that financial sector development can make to poverty reduction in developing countries, and argue that financial market imperfections are a key constraint on pro-poor growth, and that public intervention directed at the correction of these financial market failures is needed.
Abstract: The frequent failure of financial liberalisation efforts in
developing countries, and the serious damage which recent financial
crises have imposed on these economies, have led to renewed attempts to
understand the relationships between financial sector development,
economic growth and poverty reduction, and to provide a more robust
intellectual foundation on which to design efficient and pro-poor
financial sector policies for developing countries. The paper examines
the contribution that financial sector development can make to poverty
reduction in developing countries. The linkages between financial and
economic growth, and between economic growth and poverty reduction, are
considered, and some preliminary empirical evidence is presented on
these linkages. The paper goes on to argue that financial market
imperfections are a key constraint on pro-poor growth, and that public
policy directed at the correction of these financial market failures is
needed to ensure that financial development contributes effectively to
growth and poverty reduction. The final part of the paper examines in
some detail the role of financial regulation and supervision policy as a
key area for public intervention directed at enhancing the financial
sector’s contribution to poverty reduction.
TL;DR: This paper provided a selective review of the literature, as well as new empirical evidence on the relationship between financial development and economic growth for a large cross-section sample of countries and found that the effect of financial development on growth is positive.
Abstract: In recent years there has been substantial theoretical and empirical work on the role that financial markets play in fostering economic growth and development. This paper provides a selective review of the literature, as well as new empirical evidence on the relationship between financial development and economic growth for a large cross-section sample of countries. While the results indicate that the effect of financial development on growth is positive, the size of the effect varies with different indicators of financial development, estimation method, data frequency, and the functional form of the relationship.
Posted Content•
TL;DR: The authors found that greater bank concentration is not strongly associated with negative outcomes in terms of financial sector development, industrial competition, political and legal system integrity, economic growth or banking sector fragility.
Abstract: Is banking sector concentration associated with negative outcomes internationally? This paper finds that the answer is "no" Greater bank concentration is not strongly associated with negative outcomes in terms of financial sector development, industrial competition, political and legal system integrity, economic growth or banking sector fragility The paper also shows that (1) Chile does not standout as having a particularly concentrated banking system, and (2) Chilean bank concentration has changed remarkably little over the last 16 year
TL;DR: The authors used a panel of monthly data for the Czech Republic, Hungary, Poland, Russia, Slovakia, and Slovenia for the period 1994-1999 and showed that historical values for interest rates, exchange rates, and stock prices signal future movements in real economic activity.
Abstract: There is ample empirical evidence for developed economies that asset prices contain information about future economic developments. But is this also the case in transition economies? Using a panel of monthly data for the Czech Republic, Hungary, Poland, Russia, Slovakia, and Slovenia for the period 1994-1999 it is shown that historical values for interest rates, exchange rates, and stock prices signal future movements in real economic activity. This result has significant implications for policymakers, and a composite leading indicator based on the three asset prices is presented, which contains information about the future development of economic activity.
29 Feb 2000
TL;DR: In this article, the authors discuss issues and problems related to private sector involvement in China's power section in two parts: the first part consists of a summary of the conference held in Beijing June 22-23, 1999.
Abstract: This paper discusses issues and problems related to private sector involvement in China's power section in two parts. The first part consists of a summary of the conference held in Beijing June 22-23, 1999. It stresses that, despite the problems encountered and the impact of the Asian economic and financial crisis, China's power sector remains attractive to investors because of its size, growth potential, and the improving business and regulatory environments. The discussion highlighted the need for more transparency in the approval proves as well as improving creditworthiness of power offtakers. The second part, a paper on private power development in China, assesses the current status and future prospects of private sector involvement in China's power sector. It outlines the key characteristics and indicates some future developments for the different forms of private sector participation that have emerged and developed since the early 1980s. It finally provides a review of some concerns voiced by investors and a preliminary assessment of their impact on future investments.
01 Jan 2000
TL;DR: In this article, the authors examine the contribution that financial sector development can make to poverty reduction in developing countries, and argue that financial market imperfections are a key constraint on pro-poor growth, and that public policy directed at the correction of these financial market failures is needed to ensure that financial development contributes effectively to growth and poverty reduction.
Abstract: The frequent failure of financial liberalisation efforts in developing countries, and the serious damage which recent financial crises have imposed on these economies, have led to renewed attempts to understand the relationships between financial sector development, economic growth and poverty reduction, and to provide a more robust intellectual foundation on which to design efficient and pro-poor financial sector policies for developing countries. The paper examines the contribution that financial sector development can make to poverty reduction in developing countries. The linkages between financial and economic growth, and between economic growth and poverty reduction, are considered, and some preliminary empirical evidence is presented on these linkages. The paper goes on to argue that financial market imperfections are a key constraint on pro-poor growth, and that public policy directed at the correction of these financial market failures is needed to ensure that financial development contributes effectively to growth and poverty reduction. The final part of the paper examines in some detail the role of financial regulation and supervision policy as a key area for public intervention directed at enhancing the financial sector’s contribution to poverty reduction.
01 Jan 2000
TL;DR: The authors provides a brief description of Fiji's financial sector and describes chronologically the financial sector reform process, highlighting the call to pursue an efficient and effective financial sector, and highlights the need to properly integrate these financial system changes.
Abstract: Since the early 1980s, Fiji has undergone a gradual process of financial system reform. This paper provides a brief description of Fiji’s financial sector and describes chronologically the financial sector reform process. Today, Fiji’s financial system is reasonably well-developed. Progression towards a more developed financial system is inevitable in light of continuing developments domestically and internationally. Within this context, an important challenge is to properly integrate these financial system changes. This underscores the call to pursue an efficient and effective financial sector.
TL;DR: The authors analyzes the emergence and development of China's financial structure since the beginning of the economic reforms and argues that although agricultural and industrial reforms in the early 1980s have led to significant changes in the financial system, financial liberalization has progressed little since.
Abstract: Economic development is highly correlated with financial sector development. But the emergence, development, and economic implications of different financial structures are not well understood. This paper analyzes the emergence and development of China’s financial structure since the beginning of the economic reforms. By focusing on the functions of money, monetary policy, and financial intermediation, it argues that although agricultural and industrial reforms in the early 1980s have led to significant changes in the financial system, financial liberalization has progressed little since. The creation of new financial institutions and markets throughout the 1990s and the recent abandonment of some of the traditional administrative control instruments do not signify a systemic change as the underlying functions remain constrained.
31 Jan 2000
TL;DR: In this paper, the authors investigated how corporate sectors' financial and operating structures relate to the institutional environment in which they operate, using data for more than 11,000 firms in 46 countries.
Abstract: Weaknesses in the corporate sector have increasingly been cited as important factors in financial crises in both emerging markets and industrial countries. Analysts have pointed to weak corporate performance and risky financing patterns as major causes of the East Asian financial crisis. And some have argued that company balance sheet problems may also have played a role, independent of macroeconomic or other weaknesses, including poor corporate sector performance. But little is known about the empirical importance of firm financing choices in predicting and explaining financial instability. Firm financing patterns have long been studied by the corporate finance literature. Financing patterns have traditionally been analyzed in the Modigliani-Miller framework, expanded to incorporate taxes and bankruptcy costs. More recently, asymmetric information issues have drawn attention to agency costs and their impact on firm financing choices. There is also an important literature relating financing patterns to firm performance and governance. Several recent studies have focused on identifying systematic cross-country differences in firm financing patterns - and the effects of these differences on financial sector development and economic growth. They have also examined the causes of different financing patterns, particularly countries' legal and institutional environments. The literature has devoted little attention to corporate sector risk characteristics, however, aside from leverage and debt maturity considerations. Even these measures have been the subject of few empirical investigations, mainly because of a paucity of data on corporate sectors around the world. Building on data that have recently become available, the authors try to fill this gap in the literature and shed light on the risk characteristics of corporate sectors around the world. They investigate how corporate sectors' financial and operating structures relate to the institutional environment in which they operate, using data for more than 11,000 firms in 46 countries. They show that: 1) the origins of a country's laws, the strength of its equity and creditor rights, and the nature of its financial system can account for the degree of corporate risk-taking. 2) In particular, corporations in common law countries and market-based financial systems have less risky financing patterns. 3) Stronger protection of equity and creditor rights is also associated with less financial risk.
Journal Article•
TL;DR: After several years of transition, major weaknesses in the banking and enterprise sectors remain the root cause of low growth as mentioned in this paper and a large share of nonperforming assets in the portfolio of large banks, stemming from losses in the enterprise sector, has been a key impediment to financial sector development.
Abstract: After several years of transition, major weaknesses in the banking and enterprise sectors remain the root cause of low growth A large share of nonperforming assets in the portfolio of large banks, stemming from losses in the enterprise sector, has been a key impediment to financial sector development The banking system has been crippled with low levels of intermediation, high cost of capital, severe lack of financial discipline, and poor allocation of credit Reforms aimed at strengthening lending practices, encouraging foreign bank participation, improving bank supervision and, above all, a consolidation process that breaks away from the past are helping pave the path to economic recovery
TL;DR: In this article, the authors show that large gaps have opened up between the transition countries in terms of the real income rises the have achieved since 1989, and that this can be traced to inadequate corporate governance.
TL;DR: In this paper, the authors provide some analysis and thoughts for the formulation of European and Central Asian (ECA) region financial sector development strategy through a review of the financial sector reform and development experiences in ECA as well as in some other regions of the world.
Abstract: This paper aims at providing some analysis and thoughts for the formulation of European and Central Asian (ECA) region financial sector development strategy through a review of the financial sector reform and development experiences in ECA as well as in some other regions of the world.