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.

Financial Sector Development and Economic Growth in Nigeria: An Empirical Investigation

Abstract: The study examines the relationship between Financial Sector Development and Economic Growth in Nigeria. Time series data from 1990-2009 were fitted into the regression equation using various econometric techniques such as Augmented Dickey Fuller (ADF) test, Johansen Multivariate Co-integration Test, Ordinary Least Square Regression and Vector Error Correction Model (VEC). The result shows that development in financial sector variables viz: banking sector credits, total market capitalization and foreign direct investment positively affect economic growth variables - Real Gross Domestic Product. This result is consistent with a number of earlier studies reviewed in the literature that found financial sector variables to positively affect real gross domestic product.

Financial development – does it lessen poverty?

Abstract: Purpose The purpose of this paper is to empirically examine the impact of financial development on poverty reduction in developing countries. The paper also investigates whether financial development affects poverty via institutional quality and GDP growth. Design/methodology/approach To take into account the dynamics nature of panel data and country-specific effects, the authors use a two-step system GMM estimator. The authors also employ a large array of measures of financial development in order to check the robustness of the results. The analysis is carried out for a sample of developing countries using an unbalanced panel data set covering the period 1985-2008. Findings The authors find that financial development plays a significant role in reducing absolute poverty. However, the authors do not find any pro-poor impact of financial development when poverty is measured in relative terms. The authors show that the impact of financial development on poverty alleviation is statistically significant when liquid liabilities and credit granted to the private sector are used as a proxy of financial development. The results on the indirect effect of financial development indicate that financial sector development has larger effects on poverty reduction when institutional arrangements are sound or/and when economic growth is high. Practical implications The findings suggest that the inference for a pro-poor effect of financial development depends primarily on the measure of poverty and the choice of the proxy for financial development. Banking sector reforms may be an effective instrument to tackle absolute levels poverty. However, the policy makers should not rely only on financial reforms, regardless of whether they are based on banks or stock markets, to narrow the gap between the poorest quintile of the population and the richer quintiles. Rather, they should also utilize fiscal policies, such as progressive taxation and public-expenditure projects, to redistribute resources. Originality/value The paper differs from the previous studies in several ways. First, it studies the financial development-poverty nexus using three alternative indices of poverty. Second, this study focusses on a sample of developing countries only. As the structure and development level of the financial sector in poor and rich countries could differ significantly, focussing on developing countries helps mitigate the problem of heterogeneity arising from using a pooled sample of rich and poor countries. Third, robust estimation methods are applied that take into account the dynamic nature of empirical models and country-specific effects.

The Structure and Performance of Ethiopia’s Financial Sector in the Pre- and Post-Reform Periods, with a Special Focus on Banking

Abstract: One of the main objectives of financial institutions such as banks is mobilizing resources (in particular, domestic savings) and channelling these to would-be investors. This intermediation role of banks takes different forms in different economic systems. Ethiopia’s history since the 1970s clearly shows the validity of this statement.

Financial systems and development in Africa

Abstract: The focus of this program is on the improvement of decision-making in seven important areas dealing with the structure, reform, and development of financial systems in developing countries. The areas covered are: (a) reform of the structure of financial systems; (b) policies and regulations to prevent or deal with insolvency and illiquidity of financial intermediaries; (c) the development of markets for short- and long-term financial instruments; (d) the role of institutional elements in the development of financial systems; (e) the links between the financial sector and the real sectors, particularly in the case of restructuring financial and industrial institutions or enterprises; (f) the dynamics of financial systems management in terms of stabilization and adjustment; and (g) access to international financial markets. This book assembles the collection of documents circulated at the Senior Policy Seminar on Financial Systems and Development in Africa. It also includes the report that synthesizes the presentations made at the seminar and the content of the discussions which followed them.

Financial sector development, economic volatility and shocks in sub-Saharan Africa

Abstract: The role of financial sector development in economic volatility has been extensively studied albeit without informative results largely on the failure of extant studies to decompose volatility into its various components. By disaggregating volatility using the spectral approach, this study examines the effect of financial development on volatility components as well as channels through which finance affects volatility in 23 sub-Saharan African countries over the period 1980–2014. Our findings based on the newly developed panel cointegration estimation strategy reveal that while financial development affects business cycle volatility in a non-linear fashion, its effect on long run fluctuation is imaginary. More specifically, well developed financial sectors dampen volatility. Further findings show that while monetary shocks have large magnifying effect on volatility, their effect in the short run is minuscule. The reverse, however, holds for real shocks. The channels of manifestation shows that financial development dampens (magnifies) the effect of real shocks (monetary shocks) on the components of volatility with the dampening effects consistently larger only in the short run. Strengthening financial sector supervision and cross-border oversight may be very crucial in examining the right levels of finance and price stability necessary to falter economic fluctuations.