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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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01 Jan 2007
TL;DR: In this article, the authors investigate the growth process in the GCC countries and test the impact of financial development and its components on the rate of growth in the Gulf Cooperation Council countries.
Abstract: EXECUTIVE SUMMARY In this paper we investigate the growth process in the GCC countries. If openness to outside, trade and foreign direct investment are important factors for development it remains to say that the magnitude of their contribution is not evident. Many GCC countries tried to shape new policies in order to accelerate financial development and promote growth but did not succeed in translating these components into a normal circle of development. A key question in evaluating the process of growth is the extent to which foreign direct investment, banks and financial development are important in pursuing this agenda. The variance in these impacts results from some initial conditions as well as from constraints facing the development of these countries. Using the regression analysis, we will test the impact of financial development and its components on the rate of growth in the Gulf Cooperation Council countries. Despite the weakness of the datasets that are available, the major points that emerge from the analysis are not consistent with the economic theory and analytical mode reflecting the particular case of the oil exporting economies Keywords: Bank Development, Monetization, Financial Development INTRODUCTION Article #22 of the council's unified economic agreement of June 1982 stipulates that:" the member states shall seek to coordinate their financial, monetary and banking policies and enhance cooperation between monetary agencies and central banks, including an Endeavour to establish a common currency in order to further their desired economic integration." The geographic proximity and economic similarities of the GCC countries notably the role of oil in their economies, are important factors in facilitating economic and financial development and growth. Financial development and complete elimination of barriers plays an important role in this reallocation of funds to the private sector fostering investment in the most productive activities In order to allocate efficiently accumulated savings into profitable and productive projects, the countries of the GCC (Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the United Arab Emirates) should promote financial market development. Opening markets and liberalizing them are basic measures needed to promote financial development. Research supports the thesis that financial sector development promotes economic growth, however, the causation is unclear as to which precedes i.e is growth behind financial development or is it financial development that promotes growth? The countries of the GCC have a well developed traditional financial sector, namely banking sector, which may help to promote growth and development. However caution must be made on the causal relationship between financial development and economic growth. The remainder of this paper is organized as follows. In section two we provide a review of the literature and how financial development has a positive impact on growth. In section three we focus on financial development and its impact on growth by elaborating a model relating trade, openness to outside and financial development to growth and in section four we give some concluding remarks. REVIEW OF THE LITERATURE This section provides a brief review of theoretical and empirical studies about the relationship between trade, financial development and growth. If well functioning financial markets promote trade and growth or if outward orientation and growth helps to promote and develop financial markets. Various models emphasize the importance of trade and openness to outside and their impact on financial development and economic growth of nations: knowledge spillover, accumulation of physical and financial capital, foreign direct investment, etc. Recent empirical researches show that the direction of trade generally coincides with those of assets. Portes and Rey (2005) and Aviat and Coeurdacier (2007) show that trade in goods is strongly biased toward trade in assets. …

3 citations

01 Jan 2014
TL;DR: In this paper, the authors investigate the effects of remittances inflows to Malaysia's economy and does the financial sector development level have influence on remittance impact to economic growth of Malaysia.
Abstract: The objective of this study is to investigate the effects of remittances inflows to Malaysia’s economy and does the financial sector development level have influence on remittances impact to economic growth of Malaysia. Time series technique has been adopted to explore long run effect of remittances, financial depth and growth in Malaysia using annual data for the period 1984-2013. The results showed that remittances and financial depth have positive and significant effect on growth in long run. Granger Causality tests are also used to explore the relationship between remittance-growth and financial development-growth. The findings revealed that there is an impact of remittances on economic growth of Malaysia via the influence of the country’s financial depth.

3 citations

Journal ArticleDOI
Georgia Bush1
TL;DR: In this article, the authors test for empirical evidence of learning by doing in banking with the aim of identifying a micro-founded driver of financial sector development and find that experience is associated with reduced costs.
Abstract: This paper tests for empirical evidence of learning by doing in banking with the aim of identifying a micro-founded driver of financial sector development. Learning by doing entails cumulative experience reducing the amount of labor or other inputs required to produce the same amount of output. However identifying this experience effect poses challenges because firms may increase output as input prices decline, introducing the possibility of endogeneity bias in estimating the cost function. Applying a two-step correction procedure to my bank cost function, I correct for endogeneity as well as selection biases arising from sample dependence. The problem of these biases has not been addressed in empirical work on learning by doing, or the banking efficiency literature, nor have experience effects been focused on in the banking context. Using the corrected model, results suggest that experience is associated with reduced costs: the experience effect is decreasing and fades after around 10 years. For example, on average, a 10 percent increase in experience, for a bank of around 1 year of age is associated with a 10.9 percent decline in cost; for a 5 year old bank, that becomes a 2 percent decline in cost.

3 citations

Journal ArticleDOI
TL;DR: In this article, the authors analyzed some major developmental issues in the specific areas of the Armenian banking sector and insurance sector and provided recommendations for addressing those issues, and argued that over the past seven years, the Armenian economy has been improving GDP growth rate increased at a stable pace.
Abstract: This paper analyzes some major developmental issues in the specific areas of the Armenian banking sector (particularly raised by the Armenian authorities) and insurance sector and provides recommendations for addressing those issues The paper argues that over the past seven years, the Armenian economy has been improving GDP growth rate increased at a stable pace from 33 percent in 1999 to 60 percent in 2000, 96 percent in 2001, and 129 percent in 2002 Such robust economic growth provides opportunities and a good environment for financial sector development The paper also argues that the Armenian authorities should promote the financial sector development Although Armenia's economy has made good progress, its financial sector is still underdeveloped The ratio of Armenia's financial sector (which is dominated by the banking sector) assets to GDP ratio is one of the smallest in the ECA region Consequently, it is critical to examine the Armenian financial sector and address the obstacles to its development so that the momentum of the Armenian economic growth can be sustained

3 citations

Journal ArticleDOI
17 Jul 2018
TL;DR: This article investigated the finance-growth links in a representative group of ten SEE economies through empirically analyzing with panel data techniques the latest data available, and tried to understand if implementation of financial regulatory frameworks and economic reforms during the last decade has contributed in making financial sector development significant for growth.
Abstract: In a continuous challenge for increasing economic growth pace, Southeastern Europe economies need to explore all contributing channels to this process Previous researches do not find a significant relation between financial development and economic growth in SEE countries but up-to-date analyses are missing in this front This paper aims to investigate the finance-growth links in a representative group of ten SEE economies through empirically analyzing with panel data techniques the latest data available, and try to understand if implementation of financial regulatory frameworks and economic reforms during the last decade has contributed in making financial sector development significant for growth In this context, obtained results show that credit to private sector, is the only financial development indicator that has become became significantly important in short-run in positively affecting economic growth While Liquid liabilities and Assets ratio have no significance, seems that financial sector reforms need to continue in order to enhance the causal relation between finance and growth

3 citations


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