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.

The relationship between financial inclusion and income inequality in sub-Saharan Africa: Evidence from disaggregated data

Abstract: Over two decades sub-Saharan Africa has grown by an average of 4.8 percent per annum, a trend called “Africa rising in the literature” but this robust economic growth has benefited only a minority of elite individuals as poverty in the region remains high and income inequality continues to rise. This study analyses the relationship between various aspects of financial inclusion and income inequality in sub-Saharan African using the World Bank Global Findex 2011 with the intention to determine which aspects of financial inclusion have the greatest effect on income inequality. Our results show that account use for business, electronic payments and formal savings have a positive relationship with income inequality. This possibly reflects colonial institutional design as Obeng-Odoom (2016) indicated that colonial administration left behind uneven development structure which in some cases are re-enforced by current urban governance practices and processes. These colonial institutions significantly define financial sector development and shape the distribution of economic opportunities. Thus, we argue that though account ownership has improved, it does not necessarily imply an increase in credit accessibility. This is because of problems of information asymmetry associated with lack of financial infrastructure in the region that encourages banks to hold excess liquidity and thus grant fewer loans. The study accordingly recommends genuine efforts to engage in democratic governance to improve the quality and functioning of institutions to support financial sector development. Furthermore, a holistic approach to development that involves both top-down and bottom-up is recommended to encourage participation by all the sectors of the economy. Keywords: Financial inclusion; Financial institutions; Financial services; Welfare and poverty

The GATS Agreementon Financial Services : A Modest Start to Multilateral Liberalization

Abstract: This paper analyzes the links between multilateral, and unilateral financial liberalization, the former represented by the General Agreements on Trade in Services (GATS). It provides an overview of the main features of the GATS and what the participants in banking and securities within its framework, and compares GATS liberalization with the actual state of liberalization of the participants’ financial sectors. The results suggest that in many countries multilaterally liberalized financial sector policies are more restrictive than the actual state of openness or development of financial sectors. Many emerging markets liberalized little under the GATS despite often well-developed financial markets, while the opposite was true in some less developed developing countries.

Financial Development and Monetary Policy Effectiveness in Africa

Abstract: As African countries await the birth of her monetary union, the link between economic policies and the real economy will continue to dominate policy debate. This paper investigates whether financial development influences the effectiveness of monetary policy on output and inflation in Africa. We apply standard panel data techniques to annual data from 1990--2015 for a panel of 39 African countries, and find a weak relationship between financial development and monetary policy effectiveness in Africa. The results show no statistical evidence of the relationship for output growth, whereas a negative relationship exist in the case of inflation, but only at their contemporaneous levels. Thus, there is need to strengthen the monetary transmission mechanism in African countries through deliberate efforts to deepen financial sector development.

Technology and Finance

Abstract: The benefits from financial development are known to vary across industries. However, no systematic effort has been made to determine the technological characteristics that are shared by industries that tend to grow relatively faster in more financially developed countries. This paper explores a range of technological characteristics that might underpin differences across industries in the need or the ability to raise external funding. The main finding is that industries that grow faster in more financially developed countries tend to display greater R&D intensity or investment lumpiness, indicating that well-functioning financial markets direct resources towards industries that grow by performing R&D.