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.

Economic Growth and Financial Sector Development: An Indonesian Story

Abstract: What is the relationship between the finance sector development and economic growth? This paper is intended to analyze a fewer number of important financial factors using econometric analysis on some selected indicators of Indonesian financial sector during the period 1988–2013. This paper then tries to check whether the identified financial factors development cause economic growth or economic growth causes financial factors development. The Granger–Causality test shows that no financial factor significantly causes economic growth; rather economic growth causes the financial sector development during the period. In general, the financial sector of Indonesia is being unstably deepened with response to the demand of economic growth since 1988.

Non-Linear Relationship between Financial Development, Economic Growth and Growth Volatility: Evidence from Nigeria

Abstract: The relationship between economic growth, growth volatility and financial sector development continues to attract attention in the theoretical and empirical literature. Over time, some studies hypothesize that finance has a causal linear relationship with growth. Recently several other authors contradict this claim and argue that the relationship that exists between finance and growth is nonlinear. We investigate these claims for Nigeria for the period between 1970 and 2015, using semi-parametric econometric methods, Hansen sample splitting techniques and threshold estimator. We observed no evidence of ‘Too much finance’ as claimed by many researchers in recent times. We show that the relationship between financial development and economic growth is U-shaped. This is equally true for the relationship between financial development and growth volatility. We also discuss policy implications of our findings and recommend financial innovations and decentralization of stock exchanges to boost access to financial services, in addition, improved regulation to enhance financial market efficiency.

Financial Intermediation Development and Economic Growth Nexus in Sri Lanka

Abstract: This paper investigates the causal relationship between financial development and economic growth in Sri Lanka for the period 1965 to 2013 using a trivariate vector autoregressive (VAR) framework that includes investment as an additional variable. This study utilized Per Capita Gross Domestic Product (GDP) and investment (as a measurement of indirect effect) as proxies for economic growth. Money supply, bank deposits and domestic credit to the private sector, each as a percentage of GDP were used as proxies for financial development. Data analysis involved Granger causality tests using the Johansen cointegration test and Vector Error Correction Model (VECM). Results show strong long-run Granger causality of financial development to economic growth in Sri Lanka. Furthermore, results suggest evidence of bi-directional short-run causalities between bank deposits and economic growth, and unidirectional causality from money supply to economic growth. The major implication of research findings is that enhancing financial sector development policies will improve productivity and drive long run economic growth in Sri Lanka.

Environmental Risk and Foreign Direct Investment: the role of Financial Sector Development

Abstract: • Financial development plays a crucial role in accounting for the impact of foreign direct investment on environmental risk. • Financial development is poorly measured in the literature, hence unable to capture the complexity of the modern-day financial systems. • The unmitigated effect of FDI on environmental risk is detrimental. • FDI conditioned on the local financial sector development minimizes environmental risk • Countries with highly developed financial systems are able to curtail the negative impact of FDI on the environment. The study examines the role of financial sector development in the relationship between Foreign direct investment (FDI) and environmental risk using a more comprehensive measurement of financial sector development. The study set up a panel dataset to cover 45 Sub-Saharan African economies from 1982 to 2018 and applies the system GMM technique to accommodate the dynamic nature of the dataset and make provisions for endogeneity and heteroskedasticity in the series. The findings suggest that the unmitigated effect of FDI on environmental risk is detrimental. However, FDI conditioned on the local financial sector development minimizes environmental risk. Again, the findings suggest that countries with low financial sector development indicators report worse environmental risk than their counterparts. The financial sector development is a composite index comprising financial depth, access, and efficiency. Hence, as a matter of policy, we suggest that countries should make a conscious effort to further develop these components by investing in financial infrastructures like technology, regulations, and institutions.

Macro and socioeconomic determinants of savings in pakistan

Abstract: Due to close relationship of savings to economic growth, poverty, income inequality the analysis of the savings behavior becomes very important in development economics. The present study has analyzed the saving behavior of Pakistan for the period 1973- 2013. It has been found that age dependency, foreign savings and inflation have a negative and significant relationships with all the three type of savings (i.e. national, public and private), while economic growth and financial sector development enhances savings in Pakistan. The study finds that interest rate has an insignificant impact on nationals and private savings. However, in the case of public savings the impact is positive and significant. As far as the role of taxes is concerned, it has been found that taxes discourage private savings while the impact on public savings is positive.