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Financial sector development

About: Financial sector development is a research topic. Over the lifetime, 1674 publications have been published within this topic receiving 90787 citations.


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Journal ArticleDOI
TL;DR: In this article, the authors used bank ownership data for 137 countries over the period 1995-2009, identifying also the home country of banks, and found a negative relation between private credit and foreign bank presence, but only in countries with relatively distant foreign banks.
Abstract: Over the past two decades, foreign banks have become more important in domestic financial intermediation, heightening the need to understand the behavior of foreign banks better. Using a new, comprehensive database on bank ownership for 137 countries over the period 19952009, identifying also the home country of banks, we document substantial increases in foreign bank presence in many countries. We also show large heterogeneity in terms of home and host countries, bilateral patterns, and performance. In terms of impact, we find a negative relation between private credit and foreign bank presence, but only in countries with relatively distant foreign banks. Furthermore, leading up to the crisis, private credit grew faster when foreign bank presence was large, but not in countries with relatively distant foreign banks. In addition, foreign banks reduced credit more compared to domestic banks during the global crisis in countries where they have a small role in financial intermediation, but not so when they were dominant or funded through local deposits. Our results show that accounting for heterogeneity is crucial to better understand the implications of foreign bank ownership.

233 citations

Journal ArticleDOI
TL;DR: The authors examined whether there is a threshold above which financial development no longer has a positive effect on economic growth and showed that finance starts having a negative effect on output growth when credit to the private sector reaches 100% of GDP.
Abstract: This paper examines whether there is a threshold above which financial development no longer has a positive effect on economic growth. We use different empirical approaches to show that there can indeed be "too much" finance. In particular, our results suggest that finance starts having a negative effect on output growth when credit to the private sector reaches 100% of GDP. We show that our results are consistent with the "vanishing effect" of financial development and that they are not driven by output volatility, banking crises, low institutional quality, or by differences in bank regulation and supervision.

225 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

Journal ArticleDOI
TL;DR: In this article, the causal relationship among energy consumption, economic growth, relative price, financial development (FD) and foreign direct investment in Malaysia using a multivariate framework was analyzed. But the authors did not consider the impact of energy consumption and economic growth Granger causes each other.
Abstract: The aim of this study is to analyse the causal relationship among energy consumption, economic growth, relative price, financial development (FD) and foreign direct investment in Malaysia using a multivariate framework. This study covers a sample from 1972 to 2009. Both the Johansen–Juselius cointegration test and bounds testing approach to cointegration consistently suggest that the variables are cointegrated. We find that energy consumption and economic growth Granger causes each other in the short and long run. In addition, both FDI-led growth and finance-led growth hypotheses are also supported by the findings from this study. Ultimately, energy is a prominent resource for financial sector development in Malaysia because we find that energy consumption Granger causes FD. Policymakers should implement a dual strategy that, on one hand, increases investment in energy infrastructure to ensure that the supply of energy is sufficient for the financial sector and economic development, while, on the other, encourages R&D in green technology such as exercising proper soil conservation techniques and sustainable farming practices in order to reduce the consumption of fossil fuels. By doing so, environmental problems such as carbon dioxide emissions can be minimised without affecting economic growth and financial sector development in Malaysia.

219 citations

Journal ArticleDOI
TL;DR: In this article, the authors developed a unified empirical framework for characterizing the threshold conditions for financial and institutional development that an economy needs to attain before it can derive the indirect benefits and reduce the risks of financial openness.

219 citations


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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
202357
202279
202155
202093
201991
201888