Topic
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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TL;DR: In this paper, the authors investigated the relationship between financial sector development and progress in reaching the Millennium Development Goals (MDGs) and found that financial development is an important driver for economic welfare in that it reduces the prevalence of income poverty and undernourishment.
Abstract: This book can be purchased at the World Bank website. This study investigates the relationship between financial sector development and progress in reaching the Millennium Development Goals (MDGs). We assess the contribution of countries' financial sector development to achieving the MDGs. We focus on the relationships between financial development and economic welfare and growth, and the following four MDG themes: Poverty, Education, Health, and Gender Equality. In doing so, we review the theoretical channels, survey existing empirical evidence - both cross-country and case study evidence - and provide new evidence. We find that financial development is an important driver for economic welfare in that it reduces the prevalence of income poverty and undernourishment. In addition, we provide new evidence of a positive association between financial development and health, education, and gender equality.
14 citations
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TL;DR: In this article, the authors examined a variety of potential factors behind this finding, including the degrees of financial dollarization, exchange rate flexibility, bank concentration, financial sector development, and fiscal dominance.
Abstract: Several Central American (CADR) central banks with independent monetary policies have adopted policy interest rates as their main instrument to signal their monetary policy stances, often in the context of adopting or transitioning to inflation targeting regimes. This paper finds that the interest-rate transmission mechanism, or the pass-through of the policy rate to market rates, is generally weaker and slower in CADR than in the LA6, the countries selected as benchmarks. A variety of potential factors behind this finding are examined, including the degrees of financial dollarization, exchange rate flexibility, bank concentration, financial sector development, and fiscal dominance. Through panel data analysis, the study suggests that the transmission mechanism can be strengthened by increasing exchange rate flexibility, and, over time, by adopting measures towards reducing financial dollarization, developing the financial sector, and reducing bank concentration.
14 citations
TL;DR: In less than a decade after the debt crisis of 1982, developing countries have experienced a surge of capital inflows in recent years as discussed by the authors and this trend became more pronounced in the 1990s resulting in an increase in overall balance of payments surpluses and accumulation of reserves.
Abstract: In less than a decade after the debt crisis of 1982,
developing countries have experienced a surge of capital inflows in
recent years. This trend became more pronounced in the 1990s resulting
in overall balance of payments surpluses and accumulation of reserves.
Total private capital inflows to developing countries exceeded $173
billion in 1994, compared to annual average inflows of $34 billion
during 1983–90 [World Bank (1995)]. Although the characteristics of
capital inflows in this episode are different than in the period prior
to the last debt crisis, nevertheless concerns about macroeconomic
stability, loss in competitiveness, financial sector vulnerability and
excessive borrowing remain the same. While the rise in inflows during
1991–93 was supported in part by low interest rates and weak economic
activity in industrial countries, improved economic policies and
prospects in most recipient countries also played an important role. The
larger share in inflows of those countries that achieved greater
progress in economic reforms, is evidence of the importance of recipient
country policies. During this period, the composition of private flows
to developing countries also became more diversified. Foreign direct
investment (FDI) accounted for 45 percent of total equity inflows in
1994, with debt accounting for 32 percent and portfolio flows accounting
for the remaining 23 percent.
14 citations
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TL;DR: In this paper, the effects of certain institutional factors on financial sector development in Sub-Saharan Africa (SSA) are assessed using DEA to determine the extent to which these institutions affect the financial sector, and suggest which institutions play a more critical role in each country.
Abstract: The paper assesses the effects of certain institutional factors on financial sector development in Sub- Saharan Africa (SSA). Data Envelopment Analysis (DEA) is applied to determine the extent to which these institutions affect the financial sector, and to suggest which institutions play a more critical role in each country. Results suggest that institutional factors affect financial depth and access to financial services more than asset quality and profitability (measured by nonperforming loans (NPL) and return on equity (ROE). The results also suggest that depth of credit information has the strongest influence on the NPL ratio, and political stability affects access the most. Based on model findings, policy implications on prioritizing institutional reforms to enhance financial sector development are suggested for individual countries and for country groups.
14 citations