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.

Synthesizing a giant literature: a narrative of quantitative evidence on causes and consequences of financial sector development

Abstract: The aim of this synthesis paper is to provide a narrative to the empirical findings of the comprehensive literature review concerning the quantitative effects of financial development on economic growth and employment and various determinants of financial sector development. The literature review has been restricted mostly to high-quality academic research that focus on developing countries over the period of 1960-2012. Due to data constraints, this review also includes cross-country analysis, where developed and developing countries are stacked together. The main findings include (i) a positive relationship between financial development and economic growth and employment subject to a number of qualifications, (ii) a complicated relationship of regulations and supervision with financial sector development and (iii) a positive relationship between enabling institutional environment and financial sector development. This review also clarifies some missing avenues in the literature and provides a number of suggestions for future work.

Inequality, ICT and Financial Access in Africa

Abstract: This study investigates the role of information and communication technology (ICT) on income inequality through financial development dynamics of depth (money supply and liquid liabilities), efficiency (at banking and financial system levels), activity (from banking and financial system perspectives) and size, in 48 African countries for the period 1996 to 2014. The empirical evidence is based on Generalised Method of Moments. While both financial depth and size are established to reduce inequality contingent on ICT, only the effect of financial depth in reducing inequality is robust to the inclusion of time invariant variables to the set of strictly exogenous variables. We extend the analysis by decomposing financial depth into its components, namely: formal, informal, semi-formal and non-formal financial sectors. The findings based on this extension show that ICT reduces income inequality through formal financial sector development and financial sector formalization as opposed to informal financial sector development and financial sector informalization. The study contributes at the same time to the macroeconomic literature on measuring financial development and responds to the growing field of addressing post-2015 Sustainable Development Goals (SDGs) inequality challenges by means of ICT and financial access.

The Demographic Challenge for Economic Policy Makers: Labor Market Developments in a Framework of Sustainable Economic Growth and Financial Sector Development

Abstract: In the years to 2020, the MENA region will have to create something on the order of 55–70 million jobs just to keep pace and bring the level of overall unemployment down to a more palatable norm. If the demographic time bomb cannot be defused, the region will continue to be exposed to social tension and political upheaval. This chapter traces some of the reasons for the region’s chronic unemployment and it sketches a reform agenda based on the requirements associated with financial sector development. The chapter presents an insurance perspective, because insurance, by providing mechanisms for risk transfer, expands the production possibility frontier of economies. Insurance, however, does not exist in a vacuum. Consequently, the chapter’s focus is on the prerequisites for creating an institutional environment that fosters macroeconomic stability, which ultimately also lays a basis for financial market stability. A quick glance at the region reveals that most MENA countries fall short of necessary prerequisites on almost all points.

Financial Sector Development and Total Factor Productivity Growth

Abstract: Recent years have witnessed important structural changes around the world as a result of the globalization process, the creation of new economic blocks and the liberalization of the financial sector in many countries. In view of this, many sectors of the industrialized countries have gone through major deregulatory changes to acclimatize themselves to new environments. At the same time, many countries have undertaken institutional reforms to build a market-orientated financial system in the hope that transition towards a market economy will improve productivity. These changes often tend to distort the markets (in the short run), thereby affecting the allocation of resources. Furthermore, in the face of uncertainty resulting from changes in regulatory structure and the development of financial institutions to foster market economy, many countries might not be able to achieve their maximum growth potential. In other words, productivity growth is likely to depend on the development of financial institutions and the stage of economic development. That is, a less developed country is likely to benefit more (in terms of output growth rate) from development of financial institutions than a developed economy that has well-functioning and sound financial institutions.