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.

Interactive effects of human capital in finance–economic growth nexus in Sub-Saharan Africa

Abstract: The purpose of this paper is to examine the interactive effect of human capital in financial development–economic growth nexus. Relative to the quantity-based measure of enrolment rates, the main aim was to determine how quality of human capital proxied by pupil–teacher ratio influences the relationship between domestic financial sector development and overall economic growth.,Data are obtained from the World Development Indicators of the World Bank for 29 sub-Saharan African (SSA) countries over the period 1980–2014. The analyses were conducted using the system generalised method of moments within the endogenous growth framework while controlling for country-specific and time effects. The author also follows Papke and Wooldridge procedure in examining the long-run estimates of the variables of interest.,The key finding is that, while both human capital and financial development unconditionally promotes growth in both the short and long run, results from the interactive terms suggest that, irrespective of the measure of finance, financial sector development largely spurs growth on the back of quality human capital. This finding is also confirmed by the marginal and net effects where the interactive effect of pupil–teacher ratio and indicators of finance are consistently huge relative to the enrolment. Statistically, the results are robust to model specification.,While it is laudable for SSA countries to increase access to education, it is equally more crucial to increase the supply of teachers at the same time improving on the limited teaching and learning materials. Indeed, there are efforts to develop rather low levels of the financial sector owing to its unconditional growth effects. Beyond the direct benefit of finance, however, higher growth effect of finance is conditioned on the quality level of human capital. The outcome of this study should therefore reignite the recognition of the complementarity role of human capital and finance in economic growth process.,The study makes significant contributions to existing finance–growth literature in so many ways: first, the auhor extend the literature by empirically examining how different measures of human capital shape the finance–economic growth nexus. Through this the author is able to bring a different perspective in the literature highlighting the role of countries’ human capital stock in mediating the impact of financial deepening on economic growth. Second, the author makes a more systematic attempt to evaluate the relative importance of finance and human capital in growth process while controlling for several ancillary variables.

Financial development and poverty reduction in India: an empirical investigation

Abstract: Purpose – The purpose of this paper is to examine the relationship between financial sector development and poverty reduction in India using annual data from 1970 to 2012. The paper attempts to answer the critical question: does financial sector development lead to poverty reduction? Design/methodology/approach – Stationarity properties of the series are checked by using Ng-Perron unit root test. The paper uses the Auto Regressive Distributed Lag (ARDL) bound testing approach to co-integration to examine the existence of long-run relationship; error-correction mechanism for the short-run dynamics and Granger non-causality test to test the direction of causality. Findings – The co-integration test confirms a long-run relationship between financial development and poverty reduction for India. The ARDL test results suggest that financial development and economic growth reduces poverty in both long run and short run. The causality test confirms that there is a positive and unidirectional causality running fro...

Financial Inclusion: What Have We Learned So Far? What Do We Have to Learn?

Abstract: The past two decades have seen a rapid increase in interest in financial inclusion, both from policymakers and researchers. This paper surveys the main findings from the literature, documenting the trends over time and gaps that have arisen across regions, income levels, and gender, among others. It points out that structural, as well as policy-related, factors, such as encouraging banking competition or channeling government payments through bank accounts, play an important role, and describes the potential macro and microeconomic benefits that can be derived from greater financial inclusion. It argues that policy should aim to identify and reduce frictions holding back financial inclusion, rather than targeting specific levels of inclusion. Finally, it suggests areas for future research.

An Empirical Assessment of Financial Sector Development and Economic Growth in Nigeria

Abstract: The objective of this paper has been is to examine empirically, the implications of financial development for economic growth in Nigeria. Time series data covering the period between 1990 and 2011 from Nigeria. The cointegration technique with its implied Error Correction Mechanism (ECM) was applied. This commenced with the ADF unit root test, followed by the Johansen cointegration test. The Overparameterize and Parsimonious ECM was next and this was followed by the Vector Error Correction, diagnostic tests and Cholesky variance decomposition. The variables included Real Gross Domestic Product, Financial deepening which is a ratio of money supply to Gross Domestic Product, liquidity ratio, interest rate and credit to the private sector. Financial sector development has not significantly improved private sector development. The minimum capital base and liquidity ratio has improved the level of economic growth in Nigeria. The Johansen cointegration test suggests a long run relationship among the variables and the significant ECM which is negatively signed supports the long run relation among the variables and indicates a satisfactory speed of adjustment. Although financial sector development has on the aggregate significantly improved the level of economic performance, the credit to the private sector did not play significant role. The result recommends, amongst others, that further development of the financial sector should be oriented towards the development of the private sector.

Financial Inclusion in the Digital Age

Abstract: The policies needed to promote financial inclusion in the digital age were discussed at an international conference held at the Asian Development Bank Institute. The event took place on 7–8 April 2016 and was attended by approximately 100 high-level government officials and banking sector employees. Key issues and policy suggestions arising from the conference form the basis of the following discussion. [Policy Brief no. No. 2016-7 December].