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 Impact of Financial Development and Macroeconomic Fundamentals on Nonperforming Loans among Emerging Countries: An Assessment Using the NARDL Approach

Abstract: The relationship between financial development indicators and non-performing loans (NPLs) has garnered significant attention, especially in emerging countries. The puzzle of whether financial sector development increases or decreases Non-performing Loans (NPL)s has not been resolved to the satisfaction of the curious mind. This research attempts to answer the above question by studying the asymmetric and symmetric association between financial sector development and NPLs, by utilizing the novel non-linear autoregressive distribution lag (NARDL) and the linear autoregressive distribution lag (ARDL) approach. Moreover, to make the study inclusive, we have added a series of proxies to measure financial sector development and macroeconomic vulnerabilities. Our main findings confirm that financial sector development and NPLs move together in the long run, and there is significant evidence of the asymmetric relationship. We infer that NPLs react differently to the negative and positive shocks of financial development and macroeconomic variables both in the short and long run. In the long-run positive shocks in financial intermediation, banking efficiency, banking depth, banking stability index, and banking non-interest income significantly impact the NPLs in emerging countries. The positive shocks of financial sector development (financial intermediation and size of banks) increase NPLs in emerging countries and vice-versa. Furthermore, regarding the macroeconomic variables, the positive shock of inflation, unemployment, and interest rate positively affect NPLs. The empirical analysis also concludes that in the long-run foreign bank presence is an insignificant factor affecting NPLs in the selected countries. This study emphasizes that, unlike the linear model, the non-linear model provides a more realistic and robust result by highlighting hidden asymmetries, which will help policymakers make appropriate strategic decisions.

Role of ict as a contingency factor in financial sector development, remittances, and economic growth nexus: an empirical study of indonesia

Abstract: This study examines the role of ICT as a factor in Indonesia’s financial sector development, remittances, and economic growth nexus using annual data from 1984-2017. We use the bounds testing procedure based on the Autoregressive Distributed Lag framework and the neoclassical growth model. The findings of the study reveal that ICT has indeed emerged as a significant factor in the remittance-growth nexus by playing a complementary role in financial sector development. The policy implication is that ICT needs to be supported at all levels and the financial inclusion process should be carried forward as it has all the potential to speed up economic growth and development.

Causal Relationship between financial sector development and economic growth: a case of Zimbabwe

Abstract: This paper aims to investigate the impact of financial sector development on economic growth in Zimbabwe, the reason being that no such research has been carried out in Zimbabwe. The research utilized secondary data for the period 1995 to 2008.Granger causality test is used to test the causality between economic growth and four financial sector development indicators. Johansen co-integration approach is used to test the long run relationship between economic growth and financial sector development indicators. The paper found out that granger causality runs from economic growth to financial sector development. The results support some empirical evidence that postulates that the granger relationship runs from economic growth to financial development and is there is a positive relationship in the long run. The study provides empirical evidence that economic growth granger causes financial sector development and there are positively related in the long run. Therefore, it is important that the government of Zimbabwe should implement policies that fosters economic growth and this will subsequently promotes financial sector development

The evolution of the financial system in Botswana

Abstract: One of the important determinants of economic development is the presence of a competent and effectual financial system. This paper presents the evolution of the financial sector of Botswana, specifically focusing on monetary policy, financial sector legislation, financial reforms and financial sector development trends. The financial system initially began with a financially repressive structure followed by financial sector liberalization that was instituted so as to enhance banking sector performance, increase interbank competition, promote access to credit facilities for development activities and increase national savings. Results from this study show that the introduction of financial liberalization led to increased financial development as evidenced by increases in interbank competition, access to credit facilities, the ratio of bank deposits to GDP (Gross Domestic Product) and increased banking sector stability and performance. In addition, savings have relatively increased after liberalization though the main contribution to savings is from Government, mainly from revenue from sales of precious minerals.