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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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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.

11 citations

Journal ArticleDOI
TL;DR: In this paper, the authors examined the causality between non-oil export, financial sector development and economic growth in Nigeria, using annual data from 1985 to 2015, and found that a bi-directional causality runs from total bank deposit, credit to the private sector and market capitalization to economic growth.
Abstract: This study examined the causality between non-oil export, financial sector development and economic growth in Nigeria. The study employed credit to private sector, total bank deposit, prime lending rate, market capitalization, money market instruments as proxy to measure financial sector development, while GDP was used to capture economic growth, using annual data from 1985 to 2015. All the variables were stationary at first difference using the Augmented Dickey Fuller (ADF) and Phillip Perron (PP) tests. The Johansen Cointegration test result showed that a long-run relationship between non-oil export, financial sector development and economic growth existed. The Granger causality test indicates that a bi-directional causality runs from total bank deposit, credit to the private sector and market capitalization to economic growth. Also, a unidirectional causality existed between prime lending rate and economic growth. The study shows that out of the five proxy for financial sector development, three showed significant causality with economic growth. These findings therefore imply that a bi-directional relationship exists between financial sector development and economic growth, indicating that a growth in the financial sector will cause same in the economy and vice versa. Finally, the study recommends that the government formulate policies that will enhance credit to the private sector, such as not operating the Treasury Single Account (TSA) Policy in a holistic manner, so that banks will have fund to propel their credit delivery function effectively; considering the fact that the public sector drives the Nigerian economy as it stands now. However for capital market development, investors protection policies should be enhanced in order to strengthen and improve public confidence in the capital market, such as reducing charges for the purchase and sale of securities and reduction of listing requirements for new companies on the exchange.

11 citations

01 Jan 2007
TL;DR: In this paper, the authors examined the relationship between private sector credit, economic growth and trade balance, and found the presence of a long-run relationship with linkage from domestic private-sector credit to economic growth but not vice versa.
Abstract: Fiji witnessed strong growth in domestic private sector credit for the continuous of four years from 2001. Aside from contributing to Fiji’s economic recovery, the credit expansion resulted in deteriorating annual trade balances. Examining the relationship between private sector credit, economic growth and trade balance, this paper finds the presence of a long-run relationship with linkage from domestic private sector credit to economic growth but not vice versa. Further, the results indicate evidence of a bi-directional short-run causality between the variables suggesting that private sector credit not only promoted economic growth, but also affected trade balance.

11 citations

Book
20 Oct 2015
TL;DR: In this paper, a diagnostic trade integration study (DTIS) analyzes the internal and external constraints to further integration with the world economy, keeping in view the end goals of job creation and poverty reduction, as well as enhancement of citizens' welfare.
Abstract: This diagnostic trade integration study (DTIS) analyzes the internal and external constraints to further integration with the world economy, keeping in view the end goals of job creation and poverty reduction, as well as enhancement of citizens’ welfare. The DTIS seeks to identify policies as well as gaps in physical and institutional infrastructure that need to be overcome to consolidate Bangladesh’s strengths in existing markets as well as help diversify export products and export markets. Bangladesh aims to accelerate growth to become a middle-income country by 2021, continue its high pace of poverty reduction, and share prosperity more widely among its citizens. It seeks to increase the growth rate of its economy to about 7.3 percent per year over the sixth plan period, fiscal year 2011 to fiscal year 2015, and reduce the poverty headcount by about 10 percentage points. This DTIS has identified a four-pillar strategy that can contribute to accelerate development of the export sector, a priority for jobs and growth: breaking into new markets; breaking into new products; improving worker and consumer welfare; and building a supportive environment. Implementing the four-pillar agenda will help improve the overall competitiveness of the economy and provide sources of strength other than low wages.

11 citations

Posted Content
Dimitri Vittas1
TL;DR: Vittas et al. as discussed by the authors argue that public and private pillars are essential for a well-functioning pension system and argue for the promotion, structure, and regulation of funded pillars.
Abstract: Vittas argues that public and private pillars are essential for a well-functioning pension system. Public pillars, funded or unfunded, offer basic benefits that are independent of the performance of financial markets. Since financial markets suffer from prolonged, persistent, and large deviations from long-term trends, they cannot be relied on as the sole provider of pension benefits. Funded pillars provide benefits that are based on long-term capital accumulation and financial market performance. But they need to be privately managed to minimize dependence on public sector institutions and avoid government dominance of the economy and financial markets. The author focuses mainly on the promotion, structure, and regulation of funded pillars. He discusses the case for using compulsion and tax incentives, for exempting some categories of workers such as the very young (under 25), the very old (over the normal retirement age), the very poor (those earning less than 40 percent of the average wage), and the self-employed, and for offering a credit transfer to be added to individual capitalization accounts to encourage participation by lower-income groups. A robust regulatory framework with a panoply of prudential and protective rules covering "fit and proper" tests, asset diversification and market valuation rules, legal segregation of assets and safe external custody, independent financial audits and actuarial reviews, and adequate disclosure and transparency would be essential. An effective, proactive, well-funded, and properly staffed supervision agency would be necessary. Tight investment rules could initially be justified for countries with weak capital markets and limited tradition of private pension provision. But in the long run, adoption of the "prudent expert" approach with publication of "statements of investment policy objectives" (SIPOs) would be preferable and more efficient. Various guarantees covering aspects such as minimum pension levels and relative investment returns need to be provided to protect workers from aberrant asset managers and insolvency of annuity providers, but care must be taken to address effectively the risk of moral hazard. Vittas also argues for greater individual choice, including the creation of a dual regulatory structure. One part would involve heavy regulation with constrained choice of investment funds, limits on operating fees and on account switching, and strong government safeguards and guarantees. This would cater to those workers with low risk tolerance. The other part would be more liberal but based on strong conduct rules. It would offer greater choice of investment funds, allowing multiple accounts and liberal account switching, imposing no limits on operating fees, and providing no or fewer state guarantees. This would cater to workers seeking a higher return and who are willing to tolerate a higher level of risk. This paper - a product of the Financial Sector Development Department - is part of a larger effort in the department to study the promotion of pension funds. The author may be contacted at dvittas@worldbank.org.

11 citations


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