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.

Financial Sector Reform: A Review of World Bank Assistance

Abstract: This study analyzes the role of the Bank in helping client countries to implement financial sector reforms It focuses on the country as the unit of analysis, rather than individual loans, and on performance indicators in the financial and real sectors Even without full incorporation of lessons still to be drawn from recent East Asia crisis, this study find a satisfactory outcome in only 12 of the 23 countries that it examines Initial conditions appear to be significant in determining the outcome of reforms, and prior sector work is important for ensuring that policy reforms in Bank loans reflect a country's initial conditions In general, adjustment loans are more successful and more sustainable in promoting institutional development than are financial intermediaries loans The main recommendations of the study are that the internal guidelines of financial sector operations provide a valid framework for preparing operations in support of financial sector reforms The Bank should go beyond these guidelines, however, by incorporating best practices on both substantive issues and Bank processes, after sufficient time has elapsed to evaluate and learn from recent developments in East Asia

Natural Resources, Financial Development and Sectoral Value Added in a Resource Based Economy

Abstract: This chapter vestigates the effects of natural resource dependence and financial development on the sectoral value added in a resource based economy, Yemen. We allow the effect of these two factors to be different for the growth of agricultural, manufacturing and service sectors respectively. We remark on one hand that natural resource curse hypothesis is strongly supported. The agricultural and manufacturing sectors are affected by this phenomenon which implies the existence of Dutch disease symptoms in Yemen. On the other hand, financial sector development does not play an important role in fostering real sectors activities. The service sector is the only sector that benefit from the financial sector development in Yemen. This finding opens up a new insight for Yemeni economy to sustain sectoral growth by controlling the level of natural resource dependence and proactiveness sectoral strategy for financial sector development.

Financial Development and Economic Growth: Evidence from Heterogeneous Panel Data of Low Income Countries

Abstract: This paper examines empirical relationship between financial development and economic growth while incorporating the inflation rate effect on financial development for low income countries. The study focuses on both the indirect finance and the direct finance, separately as well as collectively. We apply most appropriate econometric methodology of Weinhold (1999) and Nair-Reichert and Weinhold (2001) for causality analysis in heterogeneous panel data. Two sets of results are reported. First, the relationship between financial development and economic growth from contemporaneous non-dynamic fixed effects panel estimation can at best be interpreted as mixed. Negative and statistically significant estimates of coefficient of the inflation and financial development interaction variable indicate that financial sector development is actually harmful for economic growth when inflation is rising. Second, in contrast with the recent evidence of Beck and Levine (2003), use of more appropriate econometric methodology of dynamic heterogeneous panel for causality analysis and a refined model reveal that there is no definite indication that finance spurs economic growth or growth spurs finance. Our findings are in line with the Lucas (1988) view on finance that the importance of financial matters is very badly over-stressed in popular and even much professional discussion.

Which Factors Drive the Regional Expansion of Microfinance Institutions? Evidence from Peru

Abstract: This paper analyses the location decisions and geographical expansion of microfinance institutions (MFIs) across Peru. To this end, econometric analyses are performed on a self-constructed dataset that covers MFI presence and expansion in the 1832 districts of Peru, and this for 39 MFIs and 13 commercial banks over the period 2001–2008. The paper shows that Peruvian MFIs have expanded considerably during the last decade. MFIs especially increase access in districts with higher levels of development and therefore seem to follow principally a commercial logic. Districts with banks have also a higher probability of an MFI opening. Copyright © 2015 John Wiley & Sons, Ltd.

Debt overhang, financial sector development and economic growth

Abstract: This paper uses panel data of 20 high external debt countries selected from Asia and Latin-America to investigate the financial sector development-debt-growth nexus within the framework of an endogenous growth and financial development mechanism. First, we found that among 20 high external debt countries, the external debt-to-GDP ratio is significantly negatively correlated with economic growth rates, indicating that excessive debt is detrimental to the growth of an economy. Second, we introduced the simultaneous GMM equations between financial sector development and economic growth to evaluate the interaction effects among economic growth, external debt, and financial sector development. In empirical results, we find that the negative impact of high debt on growth appears to operate through a strong negative effect, in terms of compulsion to resort to financially repressive policies. In addition, we also find a two-way relationship between financial sector development and economic growth.