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.

Finance in China - Removing ambiguity over governments role

Abstract: Chinese economic development is placing increasing demands on the financial sector. There are many aspects to this, including the pressing need to upgrade institutional capacity. Some aspects of the challenge expose deeper issues. This note focuses on one pervasive aspect. It points out how three major emerging development problems of the Chinese financial system - regional misallocations, the equity overhang, and the funding of infrastructure, each have their roots in an uncertain and increasingly dysfunctional ambiguity in the dividing lines between state and market-driven control. Drawing on both international experience and recent research findings specific to China, the paper illustrates the damaging effects showing how hitherto apparently unrelated problems may reflect an aspect of the same ambiguity. A reorientation and clarification of the dividing line between state and private thus offers wide-ranging benefits.

Financial Sector Development in Africa: Opportunities and Challenges

Abstract: Africa's financial systems face challenges across many dimensions, as discussed in the report financing Africa: through the crisis and beyond. The analysis in that report was based partly on several detailed background papers that are included in this volume. The next six chapters are written by experts in their respective areas and provide an in-depth analysis of these challenges and present possible solutions. In this introduction, the authors provide an overview of the different chapters and how they are related to each other and the main volume. The three chapters in first part focus on key challenges concerned with access to financial services, including financial and operational deficiencies in the microfinance market, reaping the benefits from the technological revolution of retail banking, and deepening and broadening agricultural finance across Africa. The three chapters thus each cover different aspects with a different focus, ranging from an institutional approach to a focus on innovation as a driver of financial broadening to an important element of financial infrastructure to a specific sector. The second part includes the fourth chapter, it involves documents the sizable need for additional housing in many African countries, based on these countries' continuous population growth and an ongoing urbanization trend. The third part includes fifth chapter, which discuss the repercussions of regulatory reforms in Europe and North America for African regulators as well as local challenges. The fourth part includes the sixth chapter, which is the final chapter of this volume. It discusses the politics of financial sector reform in Africa and, more specifically, the space needed for an activist role for government to help create the markets and coordination mechanisms necessary for financial markets to deepen and broaden.

Financial Intermediation and Economic Growth: Evidence from Rwanda

Abstract: The relationship between financial intermediation and economic growth has been under investigation for decades. Some studies have been conducted using panels of countries with or without similar characteristics while others have been carried out on individual countries. In less-developed countries, the evidence about the link between financial intermediation and economic growth is particularly deficient. This study attempts to empirically investigate the possible cointegration and causal link between financial intermediation and economic growth in Rwanda, using quarterly data spanning from 1996Q1 to 2010Q4. A Structural Vector Autoregressive model is used to analyse the short-run dynamics between variables of interest. Findings of the study show evidence of a cointegrating relationship between financial intermediation and economic growth in the country. It is further observed that a shock to domestic private sector credit accounts for the largest proportion of fluctuations in real output growth, while the shock to potential liquidity comes second. This supports the supply-leading hypothesis in the intermediation link between financial sector development and economic growth in Rwanda, which suggests that the country can achieve significant economic growth if it reinforces incentives to attract businesses that can easily make use of the present financial services.

Velocity Of Money Within The Framework Of Monetary Targeting In Sierra Leone

Abstract: A pre-requisite for monetary targeting strategy is a stable money demand function, which in turn requires stability in velocity. The study investigates the impact of financial development on the velocity of money in Sierra Leone, over the time horizon 1970-2013. The method of principal components is employed to construct a Financial Sector Development index (FSD) used to proxy development in the sector. Using the Autoregressive Distributed Lag (ARDL) approach, the results confirm that financial sector growth has a significant negative relationship on income velocity in Sierra Leone. The pair-wise granger causality test reveals that there is no causality between financial development and income velocity thus underscoring the fact that Sierra Leone is still in its early stages of financial development. Money growth also Granger causes velocity of money and thus changes in the past values of money growth can be used to predict the change in the present value of velocity of money. Hence, the Friedmanite Hypothesis is verified in the case of Sierra Leone. Thus, the study recommends that the monetary authority should improve access to banking and financial services especially in rural areas as a vast majority of the rural community is financially excluded so as to improve financial development and overall economic growth.

Foreign Direct Investments and Economic Growth: The Primary Drivers

Abstract: In order to achieve the Global Millennium Development Goals (MDGs) there is need for enhanced global partnerships in areas such as trade, health, security, environmental sustainability, food security and education. Owing to these initiatives Foreign Direct Investments (FDIs), Official Foreign Development Assistance (ODAs) and other external capital flows are increasingly considered as drivers of economic growth for developing countries. By year 2000 FDIs flow to developing countries accounted for 19% of the total global FDI flow compared to 52% in 2010. Collectively FDI equates to 11% of global GDP and generates close to 80 million jobs globally. Global FDI totaled to US$ 1.2 trillion in 2010, US$ 1.4 trillion in 2011 and US$ 1.8 trillion in 2012. Similarly, the developing countries received half of the FDI and only invested a quarter of the FDI out flow. Studies show that FDIs contributes to economic growth by stimulating several macro-economic and demographic variables which are major agents of economic growth. This paper sought to explain the effect of FDI on the determinants of economic growth human capital development, financial sector development and trade openness. A sample of 30 African countries was used for the study. The data used was retrieved from UNCTAD and World Bank online databases for the period between 1980 and 2012 and analyzed through a fixed effect regression model. The results of the study show that FDI had a positive impact on measures of financial sector development and trade openness. However the effect of FDI on human capital development was negative. The study recommends the need for favorable monetary policies that elicit more FDI for enhanced economic growth. The study also suggests increased global trade liberalization and integration to boost trade. Finally the study recommends that additional FDI flows should be directed towards human capital development.