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.

Does foreign aid act as an instrument of economic growth in India and Sri Lanka

Abstract: Foreign aid is considered as an important instrument of the foreign policy of states It acts as a major source of foreign exchange earnings for developing countries Therefore, it is regarded as a basic pillar of developmental process We examine the trends and composition of foreign aid inflows in India and Sri Lanka This study also empirically examines the relationship between foreign aid or Overseas Development Assistance (ODA) and economic growth for India and Sri Lanka using the annual data 1960-1961 to 2014-2015 Further, this study aims to test the causal relationship among foreign aid with other macroeconomic variables such as domestic investment, financial sector development and trade, and inflation rate of these countries We have employed Johansen and Juselius (JJ) (Johansen and Juselius, 1990) procedure of testing for the presence of multiple cointegrating vectors We have also used Vector Error Correction (VECM)-Granger Causality test to find out the short run dynamic equilibrium relationship among the variables The empirical results show that there are both short and long run equilibrium relationships existing between foreign aid and economic growth with other macroeconomic variables in both the countries However, the direction of inter-linkage between foreign aid and economic growth contradicts to each other in case of India and Sri Lanka, both in short run and long run We have found that the error correction term is positive and significant in selected macroeconomic variables indicating a long-run causality in India and Sri Lanka

Services Policy Reform and Commitments in Trade Agreements: An Analysis of Transition Economies

Abstract: Introduction It is a stylized fact of economic development that the share of services in GDP and employment rises as per capita incomes increase (Francois and Reinert, 1996). This reflects increasing specialization and exchange of services through the market—with an associated increase in variety and quality that may raise productivity of firms and welfare of final consumers, in turn increasing demand for services. It also reflects the limited scope for (labor) productivity in provision of some services, implying that over time the (real) costs of these services will rise relative to merchandise, as will their share of employment (Baumol, 1967; Fuchs, 1968). Services are increasingly becoming tradable as a result of the greater mobility of people and technological change. This further increases the scope for specialization in production and trade. The competitiveness of firms—both domestic enterprises operating on the local market and exporters on international markets—depends importantly on the availability, cost and quality of producer services such as finance, transport, and telecommunications. Standard economic growth theory, however, postulates that growth is merely a function of capital and labor inputs. It accords no special role to services. Services play a more prominent role in the literature on financial sector development (see Levine, 1997 for a survey), which recognizes that financial intermediaries do not simply passively convert savings into physical investment. Instead, temporary or permanent growth effects of capital accumulation and productivity improvement are supported by financial intermediaries (banks, capital markets) that actively mobilize savings and channel these towards profit-maximizing investment opportunities. Another strand of the growth literature that (implicitly) emphasizes a services dimension stresses the importance of human capital (education) and R&D (a “service” activity) in generating (endogenous) growth (e.g., Lucas, 1988, Romer, 1990).

A Cross-Country Nonparametric Analysis of Bahrain`s Banking System

Abstract: Bahrain`s financial sector development strategy succeeded in building a leading regional banking center, which has become one of the main engines of growth and sources of employment. Although the simulations conducted in the paper suggest that the banking sector in Bahrain continues to occupy a front-runner position among those in a sample of member countries of the Gulf Cooperation Council, they also reveal that: (i) as expected, banks in Bahrain still lag behind their Singaporean counterparts, and (ii) there is strong competition from other countries in the region. The paper also finds that in terms of scale efficiency, the banks in Bahrain operate at the same level as banks in Singapore and their closest competitors in Qatar and the United Arab Emirates. The results appear to be robust with respect to changes in the sample size and model specifications.

Identifying Structural Reform Gaps in Emerging Europe, the Caucasus, and Central Asia

Abstract: Using data from the World Economic Forum’s Global Competitiveness Report as an example, this paper compares structural indicators for 25 countries in Emerging Europe, the Caucasus, and Central Asia with a generic country with similar charactersitics that is 40 percent richer as well as a country with the average EU income. This comparison suggests that improvements will be particularly crucial in the areas of institutions, financial market development, infrastructure, goods and labor market efficiency and areas related to innovation. For the generally more ambitious goal of reaching average EU income, the reform needs are correspondingly larger. The methodology focuses on (approximate) comparisons between countries and does not try to establish the link between structural reforms and growth. While we test for changes in empirical specifications, caveats relate to the quality of structural indicators, possible non-linearities, and reform complementarities. The approach can be applied to other indicators and at a more granular level.

Determinants of the Brazilian stock market development

Abstract: It has become well-known now that stock markets play a key role in stimulating economic growth process. As economists and politicians alike, battle in finding ways of growing economies, it becomes imperative to establish the drivers of stock market development as they have an ultimate bearing on the stimulants of economic growth. In recent years, studies on the stock market determinants have sprung up, however, with results far from being conclusive. What turned out to be determinants in one study may not be in another study. Therefore, in this paper, we examine the key determinants of stock market development in Brazil using annual time-series data spanning from 1980 to 2016. The study was motivated by the growing important role of stock market development in economic development, on the one hand, and the conflicting findings on the determinants of stock market development, on the other hand; coupled with little to no study coverage of the topic on Brazil. Unlike some previous studies that used cross-sectional data, the current study has used time-series techniques that take into consideration the Brazilian country-specific issues. Furthermore, the current study has also employed the ARDL bounds testing procedure to determine the determinants of stock market development in Brazil. This procedure is well known for its superior small sample properties; hence it is considered more suitable for this study. The results of the study reveal that the stock market development in Brazil is positively determined by trade openness, banking sector development and exchange rate, irrespective of whether the analysis is done in the long run or in the short run. Contrary to the results of some previous studies, investment and stock market liquidity are found to have a negative influence on the development of stock market in Brazil – both in the long run and in the short run. The study, therefore, recommends that policies that favour international trade, bank-based financial sector development and exchange rate stability should be pursued in Brazil, as this would translate into further stock market development.