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.

Workers’ Remittance and Their Effect on the Level of Investment in Nigeria: An Empirical Analysis

Abstract: Despite the increasing importance of remittances in total international capital flows, the relationship between remittances and stock of capital formation has not been adequately studied. This paper studies one of the links between remittances and fixed capital formation, in particular how local financial sector development influences a country’s capacity to take advantage of remittances. Using time series data for the period 1977-2010, the study employed the ADF and Philip-Perron modified unit root tests and based its analysis on a Dynamic Ordinary Least Squares- two–stage Instrumental Variable [2SIV] approach to control for the endogeneity problem that arises from utilization of lag independent variables. We find that remittances boost stock of physical investment in Nigeria countries with positive relationship with developed financial systems by providing complementarities to finance investment in a developed financial system. Substantial government allocation on social services is equally important in accelerating capital formation. The findings of this study strongly suggest that for Nigeria to benefit from international transfers, Nigeria financial sector should be fine-tuned to complement remittances potential capital formation.

Effects of Culture on Firm Risk-Taking: A Cross-Country and Cross-Industry Analysis

Abstract: This paper investigates the effects of national culture on firm risk-taking, using a comprehensive dataset covering 50,000 firms in 400 industries in 51 countries. Risk-taking is found to be higher for domestic firms in countries with low uncertainty aversion, low tolerance for hierarchical relationships, and high individualism. Domestic firms in such countries tend to take substantially more risk in industries which are more informationally opaque (e.g. finance, mining, IT). Risk-taking by foreign firms is best explained by the cultural norms of their country of origin. These cultural norms do not proxy for legal constraints, insurance safety nets, or economic development.

Is there a nonlinear relationship between financial development and poverty 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.

Financial development–ecological footprint nexus in Malaysia: the role of institutions

Abstract: PurposeMotivated by the conflicting evidence on the effect of financial development on environmental quality, this study investigates the moderating role of institutional quality in the link between financial development and environmental quality using a robust proxy in Malaysia from 1984 to 2017.Design/methodology/approachEcological footprint is used to measure environmental quality, while financial development is proxied using three measures (domestic credit provided by the private sector, domestic credit provided by the financial sector and domestic credit provided by the banking sector). An index of institutional quality is generated from voice and accountability, government effectiveness, regulatory quality, rule of law and control of corruption. Autoregressive Distributed Lag Bounds Test, Fully Modified Ordinary Least Square and Canonical Cointegrating Regression were used as the estimation techniques.FindingsThe results show that financial development, institutional quality, economic growth and foreign direct investment improve environmental quality in the short run, whereas trade openness and natural resources worsen it. In the long run, financial development, institutional quality, economic growth, trade openness and natural resources deteriorate the environment. Furthermore, findings from the interactive term suggest that institutions and financial development complement each other to affect the environment in the short run. However, institutions and financial development perform a substitutability role in influencing the environment in the long run.Practical implicationsThe outcome of this study suggests that there are time lags in the relationship between institutional quality, financial development and ecological footprint in Malaysia. Furthermore, the study offers important policy implications to policymakers in Malaysia and other developing countries on how to mitigate environmental degradation.Originality/valueThis study contributes to the body of knowledge on the moderating role of institutional quality in the relationship between financial development and ecological footprint in Malaysia. It examines the direct and indirect effects of financial development on environmental degradation through institutional quality, which have received less attention in the context of Malaysia. The findings from this study are robust to different proxies and estimation techniques.

Remittances in the CIS countries : a study of selected corridors

Abstract: The objective of this paper is to collect, organize and analyze information on remittance corridors from Russia to Armenia, the Kyrgyz Republic, Moldova and Tajikistan. It aims to provide an overview of the current framework and infrastructure for sending and receiving remittances, including aggregate flows, existing and potential operators, cost structures and, barriers and other factors affecting costs. Ultimately, it turns to setting out topics for policymakers' attention. Section one provides an overview of migration, remittances and financial sector developments; section two analyzes results from surveys undertaken with migrants who had returned in Georgia, the Kyrgyz Republic and Tajikistan (and uses as benchmarks, Bosnia-Herzegovina, Bulgaria and Romania); section three turns to the results of questionnaires and interviews with central banks, banks, Money Transfer Operators (MTOs), postal networks and other intermediaries; and section four turns to the emerging topics for policymaking.