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 Inclusion, Regulation, and Literacy in Uzbekistan

Abstract: The level of financial inclusion in Uzbekistan remains low: the majority of households and firms, rather than using formal finance, save and borrow informally, and few use digital finance products. Both indicate the high cost of finance as the top reason for not using it. Secondly, households, which are mostly Muslim, declare that religious reasons prevent them from using formal finance, as only conventional finance is available. Unlike households, firms report that complex application procedures and high collateral requirements are the second and third most important reasons for not using formal finance. Financial inclusion is therefore constrained on the supply side. Policy recommendations include: promoting private and foreign capital participation in all segments of finance; removing/limiting the use of direct interest rate controls and administrative policy tools; and facilitating infrastructure development to promote digital finance. Demand-side policies, like improving financial literacy and customer protection, are necessary to supplement these policies. Strikingly, the country needs to create a financial inclusion and education strategy that will enable better-coordinated actions, leading to sustainable results.

Macroeconomic impact of remittances in developing economies

Abstract: This thesis examines the macroeconomic impact of remittances in developing economies, using data from 1990 to 2016. Despite poverty-reducing and welfare-enhancing characteristics for recipient households, remittances remain to inhibit macroeconomic policy in developing economies; by producing Dutch Disease effects, by creating an indeterminate effect on long run economic growth, and by reducing the quality of financial institutions. This thesis explores these key issues surrounding remittances along with a overall theme on fiscal policy, financial development and monetary policy. The significant contributions of my thesis are as follows: it provides insight into the effects of remittance inflows on fiscal cyclicality in developing economies; it provides new understanding into the relationship between remittances, financial development and economic growth; it provides a newly constructed measure of the financial development index across the panel dataset; and it shows the effects of remittance inflows on monetary policy by incorporating dynamics. The use of different empirical techniques enables the thesis to investigate the effects of remittances on key macroeconomic aggregates across several different continents. It first uses empirical techniques to examine how remittances affect fiscal policy over the business cycle. The empirical analysis consists of developing countries that are split up into six datasets: Africa, Middle East and North Africa (MENA), Asia, Latin America, Europe and the full dataset which combines the countries from all regions into one dataset. The thesis examines the potential for remittance inflows to influence fiscal policy over the fiscal cycle. The empirical evidence confirms that remittance inflows have a direct impact on the fiscal cycle. Moreover, the full dataset confirms that remittance inflows contribute for fiscal policy to be procyclical over the fiscal cycle. The Remittances-Output gap interaction term shows a positive coefficient which could be explained by the negative impact of remittances on labour supply. Similar to previous literature, Justino and Shemyakina (2012) find that the amount of remittances received by a household has an overall negative impact on labour force participation. The main finding here is that Asia, MENA, Europe and the Latin America regions corroborate the full dataset results but the effect of remittance inflows on the cyclicality of fiscal policy is countercyclical for Africa. This thesis further investigates how the level of financial development can influence the relationship between remittances and economic growth. By incorporating how remittances can influence the financial sector with the use of cross-country panel data analysis this thesis aims to bridge the gap in the existing literature in remittances and financial development. Moreover, the creation of the financial development index is intended to capture financial sector development by bringing together several existing measures of financial development. The outcomes for the full sample indicate that there is a positive impact of remittances on economic growth with those countries that are less financially developed. The results in this regard differ for the regional datasets. Does monetary policy in developing countries influence remittance inflows? This is what Chapter five explores. It investigates how developing countries can effectively understand how monetary policy responds to remittances in the short and long run. The chapter provides analysis into the dynamics of remittances and monetary policy, whilst controlling for country specific effects. The use of impulse response analysis enables the study to capture the impact of shocks from each system variable. This chapter finds a complex web of relationships between remittances, monetary policy and economic growth. The results indicate that a depreciation in the domestic currency causes an increase in the level of remittances for the full dataset and for the other regional datasets with the exception of MENA.

Financial Sector Development and Agricultural Productivity

Abstract: Global concern is rising about the performance of the agricultural sector in view of its integral role in poverty alleviation, economic development and meeting an ever-increasing nutritional demand. At the epicenter of the concern is declining productivity due to poor financial inclusion of the sector leading to low investment and returns to agriculture. A cursory examination of the existing literature on the subject reveals quite varied dimensions to the analysis of agriculture productivity-financial development nexus. Focusing on the role of financial sector development as a catalyst to agricultural productivity, we employ panel data and advances fixed-effects econometrics approach to empirically investigate the linkage between agricultural productivity and financial sector development. Results from the analysis suggests that while financial sector development contributes positively to agricultural productivity, the magnitude of the effect is however statistically insignificant. This result is robust to multiple specifications and controls for institutional quality, economic size, agro-environmental factors, level of infrastructure, human capital, as well as year and country fixed effects. Additionally, agriculture credit has a positive and significant effect on productivity across sample of 75 developing countries, but positive and insignificant for developed economies. In view of the foregoing, it is imperative that policies targeted at boosting agricultural productivity are predicated upon creating incentive system that channels greater credit to boost agricultural investment. In this sense, financial sector development is not an end itself, but a means to an end.

The role of the financial sector in enhancing economic growth in the Lao People’s Democratic Republic

Abstract: The financial sector of the Lao People’s Democratic Republic has been developing rapidly in recent years in terms of financial depth, intermediation and distribution. A developed financial sector is the basis for dynamic economic growth. Yet, unsustainable financial liberalization and growth poses risks to financial sector stability. The present report scrutinizes the role of the financial sector in enhancing economic growth in the Lao People’s Democratic Republic and aims to answer the question of adequate financial sector supervision with respect to the economy’s development. It is argued that only a prudentially supervised financial sector can enhance the economic growth performance of the country in the medium and long term.

Understanding the dynamism of electricity consumption in India: an empirical investigation

Abstract: The study intends to examine the impact of per capita GDP, financial sector development, capital formation, and urbanisation on electricity utilisation in India for the period of 1975 to 2015 The ARDL bounds test results reveal that the improved delivery of financial services, capital formation, per capita GDP, and urbanisation has a direct impact on electricity consumption in the long run Further, the outcomes of the ARDL bounds and impulse response function confirm that after achieving a level of income, the electricity demand starts decreasing, as the adoption of electricity-efficient technology may reduce the marginal usage of electricity Contrarily, even after achieving a threshold level of urbanisation the marginal impact of urbanisation on electricity usage has remained positive and significant The association between urbanisation-electricity purposes that urban Indian populace takes a long time to inculcate the electricity-saving lifestyle The study has also considered the possibility of the unknown series discontinuity