Showing papers on "Financial sector development published in 2021"
TL;DR: A very weak effect of financial development is revealed in a panel of SAARC countries, while country-specific results reveal that financial development significantly enhances the pollution level in the case of Bangladesh and Sri Lanka, and it improves the environmental quality in Nepal.
Abstract: In recent years, financial development, trade policies, and energy performance have attracted attention due to their behavior on environmental quality. Therefore, the current study examines the impact of financial development, trade openness, primary and renewable energy utilization, and economic growth on the ecological footprint in South Asian Association for Regional Cooperation (SAARC) countries from 1990 to 2017. This article progresses the proficiency of financial development by utilizing the comprehensive and multidimensional index of financial sector development based on their depth, access, and efficiency of their financial institutions and markets. In order to estimate the robust results, this study employed the cross-sectional dependency tests that allow the second-generation unit root, Westerlund cointegration, augmented mean group (AMG), error correction model (ECM), and Dumitrescu–Hurlin (D-H) panel non-causality tests. The results revealed a very weak effect of financial development in a panel of SAARC countries, while country-specific results reveal that financial development significantly enhances the pollution level in the case of Bangladesh and Sri Lanka. However, it improves the environmental quality in Nepal. Furthermore, trade openness only improves the environmental quality in the case of Nepal. Additionally, the findings explore that primary energy consumption enhances the ecological footprint in Bangladesh, Nepal, and Sri Lanka and reduces in case of Bhutan. On the contrary, renewable energy consumption significantly improves the environmental quality in all countries except Bangladesh. Finally, consistent with these findings, a number of suitable policy implications are expressed in the angle of SAARC economies.
97 citations
TL;DR: In this article, the authors examined the relationship between innovation, financial development and pollution in 27 selected industrialized countries spanning 1991-2014 and found that, while innovation lowers environmental pollution, beyond a certain threshold level, higher innovation exacerbates environmental degradation.
80 citations
TL;DR: The results confirmed that per capita income, energy solutions, trade expansion, and financial sector development invigorated the ecological footprint, carbon footprint, and land footprint in the long run.
Abstract: In the preceding two decades, the expansion of financial services has played a vital role in pursuing economic growth agendas in the developing Asian nations. However, its harmful effect on environmental quality cannot be denied. In this backdrop, in the present study, we investigated whether the financial sector development moderated the ecological footprint, carbon footprint, and land footprint in the eight developing nations of South and Southeast Asia from 1990 to 2015. In doing so, we included the per capita income, energy solutions, and trade expansions as determinants of the ecological indicators. The results of the second-generation unit root tests and Westerlund’s cointegration test reported the long-run stability and cointegration, respectively. To navigate the possible cross-country dependency, we employed the cross-sectional augmented autoregressive distributed lag approach (CS-ARDL). The results confirmed that per capita income, energy solutions, trade expansion, and financial sector development invigorated the ecological footprint, carbon footprint, and land footprint in the long run. Further, it is reported that the development in the financial sector has a significant moderating impact on the nexus between energy and environmental footprints. In other words, the financial sector development drove the association between the overall environmental quality and energy solutions in the long run. Similarly, we observed that the financial sector development worked as a significant mediator between environmental proxies and trade expansion. By including the ecological footprint, carbon footprint, and land footprint as environmental proxies, the study provides the wider environmental spectrum. Based on the outcomes of the study, we proposed a novel scheme, which may help to address the harmful environmental impacts of the financial sector development in the selected developing nations.
40 citations
01 Jan 2021
TL;DR: Although the growing body of literature that recognises a destabilising role of the trust crisis in macroeconomic stability, the understanding of mediational pathways remains limited as mentioned in this paper, and the curre...
Abstract: Although the growing body of literature that recognises a destabilising role of the trust crisis in the macroeconomic stability, the understanding of mediational pathways remains limited. The curre...
29 citations
TL;DR: In this article, the authors examined the ability of good governance in moderating the negative effect of financial development on environmental quality in Saudi Arabia over the period 1996-2016, using the Dynamic Ordinary Least Squares (DOLS) estimator.
Abstract: This inquiry contributes to the previous literature by analyzing the empirical linkage between the development of the financial sector and carbon emissions in the presence of good governance. Specifically, we examine the ability of good governance in moderating the negative effect of financial development on environmental quality in Saudi Arabia over the period 1996–2016. Different indicators of financial development and governance quality are included in the analysis. Using the Dynamic Ordinary Least Squares (DOLS) estimator, we find (i) the exostence of unconditional effects of the three indicators of financial sector development on increasing carbon emissions in most models; (ii) the indicators of governance quality increase carbon emissions in most models; (iii) the net effects on CO2 emissions are negative from the complementarity between the indicators of financial sector development and political and institutional governance, meaning that the development of financial sector reduces carbon emissions if it is accompanied by good institutional and political governance.
29 citations
TL;DR: In this article, the causal relationships among foreign direct investment (FDI), economic growth and financial sector development are far from being conclusive, a reflection of the different methodologie.
Abstract: Studies on the causal relationships among foreign direct investment (FDI), economic growth and financial sector development are far from being conclusive, a reflection of the different methodologie...
23 citations
TL;DR: In this paper, the impact of financial development, economic growth, and human capital on ecological footprint in Singapore from 1980 to 2016 was investigated. And the authors concluded that monetary expansion policies should be associated with improving human capital to achieve the United Nations SDGs in the context of Singapore.
Abstract: Singapore has been ranked in the most dynamic financial market and the highest ecological deficit country, indicating that the trade-off hypothesis may exist. The main goal of the present study is to probe the impact of financial development, economic growth, and human capital on ecological footprint in Singapore from 1980 to 2016. The outcomes obtained from the Autoregressive Distributed Lag (ARDL) method have failed to provide a clear impact of financial sector development on ecological footprint. However, the Bayesian analysis reveals that both financial development and economic growth have a harmful influence on EF, while the impact of human capital is beneficial. A theoretical conclusion derived is that monetary expansion policies should be associated with improving human capital to achieve the United Nations SDGs in the context of Singapore. The findings of the study are of particular interest to policymakers for developing sound policy decisions for sustainable economic progress which is not at the cost of environment.
20 citations
TL;DR: In this paper, the authors investigated the oil resource abundance and environmental quality nexus in Algeria, with emphasis on the role of oil export receipts and domestic oil consumption, and whether financial development is a policy option for reducing carbon dioxide (CO2) emissions in the economy.
Abstract: This paper investigates the oil resource abundance and environmental quality nexus in Algeria, with emphasis on the role of oil export receipts and domestic oil consumption, and whether financial development is a policy option for reducing carbon dioxide (CO2) emissions in the economy. Using time series data from 1971 to 2016, the Bayer–Hanck test for cointegration confirms the presence of a long‐run equilibrium relationship among the variables. Further analyses based on the auto‐regressive distributed lag (ARDL) model, fully modified least square (FMOLS), dynamic ordinary least square (DOLS), canonical cointegration regression (CCR) and Granger causality based on the vector error correction model (VECM) confirm the oil resource abundance curse in Algeria via the impact of domestic oil consumption on environmental quality. The estimates also show that financial development reduces CO2 emissions and has both short‐run and long‐run causal impact on economic growth. Thus, deepening financial sector development can be instrumental for achieving a low‐carbon and sustainable economy in Algeria.
17 citations
TL;DR: In this paper, the authors explored the role of financial sector development on the control of corruption in a global sample of 140 countries using annual data from 1996 to 2015, and made use of system generalized method of moments technique to identify the determinants of corruption across the full sample, low and lower middle-income countries and, upper middle and high-end countries.
Abstract: The current research explores the role of financial sector development on the control of corruption in a global sample of 140 countries. Using annual data from 1996 to 2015, this study makes use of system generalized method of moments technique to identify the determinants of corruption across the full sample, low and lower middle‐income countries and, upper middle and high‐income countries. Our empirical findings show that financial development plays an important role in controlling the growth of corruption across the full sample, low and lower middle‐income countries and upper middle and high‐income countries. Similarly, per capita income has a significant positive impact on control of corruption in upper middle and high‐income countries, while education plays a similar role in low and lower middle‐income countries. On the contrary, the per capita income, trade openness, government expenditure, political rights and civil liberty are the major factors, which promote the growth of corruption in low and lower middle‐income countries, whereas trade and civil liberty play the same role in high‐income countries. Given these findings, our study makes number policy recommendations and adds new knowledge to the empirical literature.
17 citations
TL;DR: In this article, the authors analyzed the impact of financial sector development indicators and financial institutions access on primary energy use based on a sample of European Union transition members over 20 years period (1996-2017) through panel cointegration and causality tests that allow for cross-section dependence.
Abstract: The main objective of the research is to analyze the impact of financial sector development indicators and financial institutions access on primary energy use based on a sample of European Union transition members over 20 years period (1996–2017) through panel cointegration and causality tests that allow for cross-section dependence. The causality analysis revealed that the direction of the causality among financial development indicators, financial institutions access, and primary energy use varied among the countries. On the other side, panel cointegration coefficients disclosed that the financial development index positively affected the primary energy use, but private credit did not have a significant effect on the primary energy use. Furthermore, financial institutions’ access had a significant negative impact on primary energy use. However, country-level cointegration coefficients indicated that the financial development index positively affected the primary energy use in Bulgaria, Croatia, Czechia, Hungary, and Slovenia, and private credit also had a positive impact on primary energy use in Bulgaria, Czechia, Estonia, Hungary, Lithuania, Poland, and Slovakia, but the effect of financial development index on primary energy use was found to be very higher than that of private credit. Moreover, financial institutions’ access negatively affected the primary energy use in Croatia, Estonia, Hungary, Poland, and Romania.
16 citations
TL;DR: In this article, the authors examined whether there is a threshold between financial development and poverty in African economies and showed that there exists a threshold level of financial development necessary for poverty reduction in Africa.
Abstract: The paper examines whether there is a threshold between financial development and poverty in African economies.,The study adopts the innovative dynamic panel threshold model of Seo and Shin (2016) made practicable by Seo et al. (2019)–the model estimates threshold relationship even in the presence of endogeneity. Also, following the recommendations of Cihak et al. (2013) and Sahay et al. (2015), we also adopt a robust measure of financial development based on the four pillars of financial deepening, stability, efficiency and access derived from the principal component analysis (PCA).,The empirical results show that there exists a threshold level of financial development necessary for poverty reduction in Africa.,Our result is important for policy formulations. First, individual African country must discover the level of financial development necessary for spurring poverty reduction. Second, policymakers, especially in lower-income countries, must keep improving their financial sector development to achieve the threshold level necessary for achieving poverty reduction even though financial development might seem less relevant at its present level.,The policymakers in Africa should note that there exists a threshold level of financial development that reduces poverty. Hence, the present level of financial development might have not yielded a considerate effect on poverty. Still, the policymakers must keep pushing on until the threshold is achieved.,Financial development reduces poverty level but it must reach a certain threshold level before it does so. So, we advise African policymakers to continue to develop their financial sector to achieve this threshold.,This seems to be the first work to document the threshold relationship using the dynamic panel threshold. Besides, the study specifically concentrates on Africa dividing the continent into different income levels. Moreover, we adopt a robust measure of financial development unlike extant studies on Africa.
TL;DR: The authors examine how different forms of institutions influence countries' level of domestic finance and financial sector development, and find that institutions and financial institutions influence the level of the domestic finance in different countries.
Abstract: Earlier studies on institutions and financial sector development are less informative given their failure to examine how the different forms of institutions influence countries’ level of domestic f...
TL;DR: In this paper, the authors provided a theoretical model for calculating the optimal credit guarantee fee, and examined whether selected macroeconomic variables and financial health of SMEs have a statistically significant impact on default risk ratio of loans to SMEs.
TL;DR: In this paper, the authors investigated the effects of national culture on financial sector development in emerging and developing economies and found that individualism and masculinity play a boosting role, whereas uncertainty avoidance hampers it.
TL;DR: A more regulated and better working financial sector contributes toward achieving monetary growth based on proficient resource allocation and reducing information asymmetries as discussed by the authors, and current trends in resourcing and resource allocation are discussed.
Abstract: A more regulated and better working financial sector contributes toward achieving monetary growth based on proficient resource allocation and reducing information asymmetries. Current trends in res...
TL;DR: In this paper, a panel cointegration approach was used to examine the impact of worker remittances on financial sector development in the top remittance recipient countries in South Asia.
Abstract: South Asia is one of the top remittance recipient regions in the world. Remittances constitute a significant portion of GDP and have helped South Asian countries to minimize a shortage of foreign reserves. Remittances have been an important source of income for many families in the region too. Despite the significant role of remittances at the local as well as national level, the impact of remittances on financial development has not been adequately studied in the case of South Asia. This paper utilizes a panel cointegration approach to examine the impact of worker remittances on financial sector development in the top remittance recipient countries in South Asia. We find evidence of a long-run relationship between remittances and financial development. Our test results show support for a positive and significant impact of remittances on financial development. The Pooled Mean Group tests suggest that a 1% point increase in remittances increases the credit to the private sector by greater than 1% points. The positive and significant impact of remittances on financial development is robust. The results support the existence of bidirectional causality between remittances and financial development in the long run.
TL;DR: In this article, the authors investigated the relationship between financial development and governance and found that financial development positively affects governance, and this positive impact was found to be robust to three different measures of governance.
TL;DR: The authors analyzes the implications of these challenges on bank competitveness, and explores the factors that could support digital advancement in banks, and suggests that onoing efforts to catch up to the digital frontier could lead to a more concentrated banking industry, as smaller and less tech-savvy banks struggle to survive.
Abstract: The latest advancement in financial technology has posed unprecedented challenges for incumbent banks. This paper analyzes the implications of these challenges on bank competitveness, and explores the factors that could support digital advancement in banks. The analysis shows that the traditionally leading role of banks in advancing financial technology has diminished in recent years, and suggests that onoing efforts to catch up to the digital frontier could lead to a more concentrated banking industry, as smaller and less tech-savvy banks struggle to survive. Cross-country evidence has suggested that banks in high-income economies appear to have been the digital leaders, likely benefiting from a sound digital infrastructure, a strong legal and business environment, and healthy competition. Nonetheless, some digital leaders may fall behind in the coming years in adopting newer technologies due to entrenched consumer behavior favoring older technologies, less active fintech and bigtech companies, and weak bank balance sheets.
TL;DR: Evidence is found that VC healthcare investments and age of VC industry increase healthcare sector growth in Europe, and more funding support and inducement policy models tailor-made to reap benefits from overall health sector growth are recommended.
TL;DR: In this article, the authors re-examine the causality nexus between ICT infrastructure and domestic level of financial development in 19 selected countries in Africa using a frequency domain spectral causality test technique that corrects the weaknesses eminent in the existing studies.
Abstract: Earlier studies on the causal relationship between information, communication and technology (ICT) and financial development have relied on a time domain approach, which does not distinguish among the various forms of causality at the different time periods. In this study, we re‐examine the causality nexus between ICT infrastructure and domestic level of financial development in 19 selected countries in Africa using a frequency domain spectral causality test technique that corrects the weaknesses eminent in the existing studies. Our findings suggest that, for most frequency levels, ICT infrastructure and domestic level of financial development in several countries are completely independent confirming the neutrality hypothesis. This holds irrespective of the measure of ICT and finance. We also find evidence to support the demand‐following hypothesis, supply leading hypothesis and feedback hypothesis at different time periods for the different countries under study. Given the findings, we argue that the causal relationship between ICT and financial development is not straightforward as suggested by the existing studies. In addition to indicator of ICT and finance, the extent to which countries' ICT infrastructure relates with their domestic financial sector development is contingent on whether the country is operating in the short, intermediate or long run.
TL;DR: Empirical evidence is provided of the link between the real exchange rate volatility and the trade balance in the light of financial development, confirming the assertion that the effect is significantly dependent on the country's level of financialDevelopment.
Abstract: The relationship between real exchange rate volatility and the trade balance has been a contentious issue since the fall of Bretton woods agreement of 1973, owing to the lack of unanimity on the effect. This article provides empirical evidence of the link between the real exchange rate volatility and the trade balance in the light of financial development, confirming the assertion that the effect is significantly dependent on the country's level of financial development. Due to Nigeria's relatively undeveloped financial system, its exchange rate dampens the country's exports. Rather than studying the relationship in isolation, we examine the moderating role of financial development on the link between export and the real exchange rate volatility in this paper. The empirical estimation is based on the Nigeria's data set spanning the years 1980–2019, and it employs threshold autoregressive non-linear co-integration and non-linear ARDL estimation techniques. According to the findings, financial development magnifies the beneficial benefits of the real exchange rate on Nigeria's foreign trade. It also states that the uncertainty in foreign capital flows has a negative impact on Nigeria's international trade. The findings have broad policy implications, implying that in order to diversify and improve the economy's future growth and associated international trade, Nigeria's policymakers should promote adequate financial sector development, as financial shocks are amplified by poorly implemented credit markets.
TL;DR: In this article, the impact of government concerns for green environment on investment decisions of industrial sector and how this effect changes across the countries that have developed financial sector is analyzed, which corroborates the thoughts of Porter's hypothesis and direct the important policy recommendations regarding environmental policies and their dynamical role in industrial sector investment decisions.
TL;DR: In this article, the authors employ a sample splitting and threshold estimation approach which allows finance-international trade to be mediated by the level of domestic financial sector development and find evidence of threshold effects for a number of the countries suggesting that the precise impact of financial development on international trade is threshold-specific given the various indicators of finance.
Abstract: Earlier studies on threshold effects of financial sector development on international trade have relied on rudimentary approach which assumes exogenous inclusion of quadratic square terms of finance. However, findings from such studies are not instructive as it obscures country's unique domestic conditions such as differences in the levels of financial sector development. By relying on 46 countries in Africa over the period 1980–2016, this study employs a sample splitting and threshold estimation approach which allows finance–international trade to be mediated by the level of domestic financial sector development. We find evidence of threshold effects for a number of the countries suggesting that the precise impact of financial development on international trade is threshold–specific given the various indicators of finance. The study highlights that whether finance supports or limits international trade crucially depends on the attainment of a certain threshold which is both country and indicator–specific.
TL;DR: In this article, the main objective of the study was to examine determinants of financial development in Ethiopia, where sustainable economic growth requires financial sector development, but financial development is low in Ethiopia.
Abstract: Sustainable economic growth requires financial sector development. However, financial development is low in Ethiopia. Hence, the main objective of the study was to examine determinants of financial...
TL;DR: In any economy, the financial sector plays a fundamentally important role in achieving economic growth and thus achieving sustainable economic development as mentioned in this paper. Therefore, interest in this sector and its role in economic development is high.
Abstract: In any economy, the financial sector plays a fundamentally important role in achieving economic growth and thus achieving sustainable economic development. Therefore, interest in this sector and th...
20 Jan 2021
TL;DR: In this paper, the authors examined the role played by country-specific factors in the determination of export product diversification process, and suggested improving international competitive strength via improving business environment to achieve the goal of diversification.
Abstract: This paper examines the role played by country-specific factors in the determination of export product diversification process. To meet this objective, the paper begins by constructing a time series data for export diversification using the Herfindahl index. Then, it applies the fully modified OLS co-integration model to a panel of selected ASEAN and SAARC countries to find out the main determinants of export product diversification. Export diversification pattern shows that since the mid-1980s the ASEAN countries have continuously witnessed export diversification and the SAARC countries embarked on export diversification journey since the early 1990s. Analysis of the determinants suggests that foreign direct investment, domestic investment, competitiveness, real depreciation of domestic currency, financial sector development and institutional strength are significantly and positively related to export product diversification in both regions. These findings have important policy implications for the two regions. They call upon the policymakers for further diversification of exports, especially in the areas of their specialization that are vital for their smooth and sustained foreign exchange earnings as well as economic development. The study also recommends improving international competitive strength via improving business environment to achieve the goal of export product diversification.
10 Feb 2021
TL;DR: The fast development of new technologies has a significant impact on the financial sector development as mentioned in this paper, which leads to the development new business models, transformation of value chains, new product delivery channels, relationships between companies in financial sector, and structural landscape of financial sector changes to the Although, there is no common understanding formed among scholars about the drivers of these strategic changes and the future financial sectors development trends.
Abstract: The fast development of new technologies has a significant impact on the financial sector development Digitalization leads to the development of new business models, transformation of value chains, new product delivery channels, relationships between companies in the financial sector and structural landscape of the financial sector changes to the Although, there is no common understanding formed among scholars about the drivers of these strategic changes and the future financial sector development trendsThe development of financial technologies, characterized by the emergence of alternative services and new industries, can be described as highly innovative The functional equivalent of the commonly used terms, such as digital disruption and digital transformation is digital innovation, in one case emphasizing strategic orientation, developing new products and business models using digital technologies, infrastructures, supply chain, and ecosystems, and, in the other - transforming traditional models to address to existing loyal customers providing more usable in the digital ecosystems access channels, solutions, and products
TL;DR: In this paper, the authors proposed a new methodological approach to construct a financial liberalization index on the basis of the dynamic factor model technique, which was used to investigate the impact of the financial sector reforms in Pakistan on economic growth.
TL;DR: In this article, the impact of financial flexibility, financial sector development and the regulatory environment on corporate investment decisions in an emerging economy was examined, and the results showed that financially flexible firms tend to invest more.
Abstract: This study aims to examine how corporate financial flexibility, financial sector development and the regulatory environment influence corporate investment decisions in an emerging economy after controlling for several macroeconomic factors.,The authors estimated random-effects models to empirically examine the impacts of corporate financial flexibility, banking sector development, equity market development, regulatory quality and corruption on corporate investment decisions. The empirical analysis is based on an unbalanced annual panel data set of a sample of 198 non-financial firms listed on the Pakistan Stock Exchange for the period 1992–2018.,The results show that financially flexible firms tend to invest more. The increased banking sector development, stock market development and better regulatory quality play a pivotal role for enabling firms to increase their investment ability. However, the results reveal that corruption acts as a barrier and reduces corporate investments during the examined period. The results suggest that unused borrowing capacity is a good source of financial flexibility. These results strongly support the pecking order theory, which explains why firms incline toward internal sources for financing their investments and why they prefer debt to equity when go for external financing.,The empirical findings of the study enable corporate managers to make better financing and investment decisions by understanding the significance of the attainment and maintenance of the corporate financial flexibility to enhance firm value. Furthermore, the findings enable corporate managers to examine and understand the role of banking sector development (BSD), equity market development (EMD), regulatory quality and the role of corruption in affecting corporate firms' investment ability, allowing them to make appropriate investment decisions, especially from an emerging economy perspective. The findings also help investors in making appropriate investment decisions while they are purchasing financial assets. Finally, the findings of the study have some implications for regulators as well. Specifically, the findings suggest that the authorities should implement economic and financial policies favoring banking sector as well as equity market development to enhance corporate investment.,The study significantly adds to the literature by examining the impact of financial flexibility, financial sector development and regulatory environment on corporate investment decisions. According to the authors' knowledge, the empirical evidence examining the impact of all of these factors on corporate investment is very scarce. Therefore, this study is an effort to fill the gap left in the literature.