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 effects of financial development on trade performance and the role of institutions

Abstract: This paper aims to address the empirical question of whether a country's level of manufacturing trade is affected by its financial sector development and to investigate the role of institutions in this relationship. Countries endowed with better-developed financial systems tend to specialize in industries that rely on external finance in production. This effect is likely to be stronger in countries with high-quality institutions. Using pure cross-sectional and panel specifications on a sample of 75 countries over the period 1971-2010, we find that financial development strongly and robustly exerts a positive effect on manufacturing exports, even after controlling for the effect of banking crises. Furthermore, institutional quality is found to have a favorable effect on the extent to which finance influences manufacturing trade, suggesting a multiplicity of experiences of the largest exporters of manufactured goods.

Does Financial Sector Development Enhance the Relationship between FDI and Economic Growth? A Comparative Study of East African Countries

Abstract: This study examines the causal relationship between FDI and GDP growth in a number of East African countries, focusing on the impact of financial sector development on this relationship. There are strong theoretical reasons to believe that a developed financial sector will enhance the impact of FDI on growth, but empirical evidence remains scant. This study looks first at the short term causal relationship between FDI and GDP growth, using a robust methodology that avoids issues associated with Granger causality testing. This testing indicates little evidence of a relationship. Johansen cointegration testing yields little evidence of a long run relationship when a VECM containing just FDI and GDP growth is estimated, however once variables proxying financial sector development and an interaction variable between FDI and financial sector development are included, we find that although FDI and GDP growth may not be cointegrated directly, there is a relationship running through their interaction with the financial sector, and that FDI only appears to have a positive impact on GDP growth in cases where the financial sector is more developed. This finding is in line with the findings of previous researchers, and has important policy implications.

Financial Services and Preferential Trade Agreements: Lessons from Latin America

Abstract: This book deals with financial liberalization issues in the context of trade negotiations. The liberalization of trade and investment in financial services is only a subset of the broader financial liberalization agenda. The purpose of trade and investment liberalization is to increase financial market access and remove discriminatory and other access-impeding barriers to foreign competition. By contrast, the main purpose of financial liberalization is to remove distortions in domestic financial systems that impede competition and the allocation of capital to its most productive and profitable uses. In turn, financial liberalization can be divided into domestic financial reform and capital account opening, and there is a rich literature on its appropriate speed and sequencing. The first part of the book covers the fundamental principles that affect trade liberalization in financial services at both the multilateral and the regional levels. It analyzes the various models of preferential trade agreements (PTAs) used by negotiators and the architectural differences of these models. The second part of this book provides concrete examples of how countries have negotiated these agreements by focusing on the specific country experiences of Chile, Colombia, and Costa Rica. These case studies provide the reader with a thorough understanding of how countries strategize, negotiate, and implement regional trade agreements in financial services.