Financial sector development, economic growth
224870449
Foreign direct investment and economic growth: Is more financial development better?
Abstract We investigate the extent to which an increase in financial development affects the positive effect of foreign direct investment on economic growth. Although the financial sector is beneficial for economic growth, the effect of further financial development on growth is found to become insignificant. Using a dynamic panel threshold model on 62 middle and high income countries spanning the period 1987 2016, we re examine the possible nonlinearity between finance, foreign direct investment, and growth. Consistent with the "vanishing effect" of financial development, we find significant evidence that foreign direct investment fosters growth in general, but the growth effect of foreign direct investment becomes negligible when the ratio of private sector credit to gross domestic product exceeds 95.6% This finding is robust to different econometric methods, various subsamples and interaction analyses, and distinct financial development indicators.
Michael J Osei Jaebeom Kim
211761052
Foreign direct investment, economic growth and financial sector development in Africa
ABSTRACT The overarching aim of this study is to examine the relationship among foreign direct investment (FDI) economic growth and financial sector development relying on annual panel data spanning 1980 2016 from 45 African countries. Results from the two system generalized method of moments reveal an ambiguous effect of FDI on economic growth although, for most part, higher FDI is associated with higher growth. Thus, the precise effect of FDI on economic growth is conditioned on the model specification. Interestingly, we notice that financial sector dampens the positive effect of FDI on economic growth. This finding holds irrespective of the indicator of financial sector and economic growth although the dampening effect of domestic credit is higher relative to private credit.
Journal of Sustainable Finance Investment
Abraham Mensah Acquah Muazu Ibrahim
225237540
Analysis of the relationship between financial development and economic growth in the EU countries
To what extent does financial development determine economic growth? Despite the obvious relationship between the level of financial development and economic growth rates, there is still no consensus on the significance and focus of this relation. Is there a directed impact of the level of financial development on economic growth, or does the development of a financial sector follow economic growth? Or is the relation between financial development and economic growth bidirectional? The aim of the research is to analyze the causal relationship between quantitative and dynamic differences in financial development and economic growth in the EU countries in the period 1995 2017. The period of the research from 1995 to 2017 is determined by the availability of financial development indicators for the EU countries. In order to prove the directed impact of the level of financial development on economic growth in the EU countries in the period 1995 2017, the average values of growth in the financial development index with the lag forwarding by one year, with the lag falling behind by one year, without the lag, and average values of the GDP growth per capita were analyzed.
Edmunds Cizo Olga Ya Lavrinenko Svetlana Ignatjeva
158997038
Economic Growth, Financial Development, and Income Inequality in BRICS Countries: Does Kuznets' Inverted U Shaped Curve Exist?
This paper aims to examine the causal relationships between economic growth, financial development, and income inequality in BRICS countries, namely, Brazil, Russia, India, China, and South Africa, using annual panel data covering the period 1990 2015. We construct the financial development index for each country by applying the principal component method on the main four proxies of financial development, i.e. domestic credit provided by banking sector, domestic credit provided to private sector, broad money supply, and stock market capitalization. Our empirical findings provide evidence supporting Kuznets' inverted U shaped hypothesis on economic growth and income inequality linkage. We find that the linear term of per capita GDP growth has positive sign and squared term has negative sign and statistically significant at the 1% significance level in all specifications. Moreover, our findings lend support for Kuznets' inverted U shaped relationship between financial development and income inequality. We find that the linear terms of all financial development proxies have positive signs and squared terms have negative signs and statistically significant at the 5% significance level in all specifications. Further, the Granger causality test results confirm a unidirectional causality running from all financial development proxies to income inequality and a bidirectional causal relationship between inflation and income inequality is found, while a unidirectional causality running from income inequality to economic growth is found, indicating that income inequality negatively affects economic growth in BRICS countries.
Moheddine Younsi Marwa Bechtini
219405235
How do financial globalization, institutions and economic growth impact financial sector development in European countries?
This paper examines the role of financial globalization, institutions and economic growth on the development of financial sector in European countries. We use panel data covering the period of 1989 2016. Using the composite index of financial development covers various dimensions of financial market, that is, depth, access and efficiency and four way classification of institutions as suggested by Rodrick (2005) and Law et al. (2018) the empirical results indicate that economic growth and institutional quality are positively associated with financial development. Contrarily, financial globalization hinders the process of financial sector development. The results are robust to using alternative proxies of economic growth, institutional indicators and capturing the period of financial crisis. These empirical findings suggest policy guidelines to develop financial sector by using globalization, institutional quality and economic growth as economic tools.
Samia Nasreen Mantu Kumar Mahalik Muhammad Shahbaz Qaisar Abbas
213648093
Globalization, financial development and economic growth: Perils on the environmental sustainability of an emerging economy
Abstract The study examines the effects of globalization, financial development, economic growth, and energy consumption on environmental sustainability in India over the period 1980 2015. The novelty of the study is the assessment of environmental sustainability in a single framework encompassing globalization, financial development, and growth effects. Findings reveal that an increased level of globalization and financial development while improving economic performance are inimical to the sustainability of the environment. In the short run, globalization, economic growth, and increased energy consumption are contributing directly to environmental degradation, while banking sector development is impacting environmental sustainability adversely through the economic growth channel. Given the severity of the findings amidst India's tryst with economic growth, proactive policies are warranted to encourage adaptation of greener and cleaner technologies in environmentally sustainable areas. This necessitates improved institutional quality encompassing stringent environmental standards, legal systems, property rights, corruption, financial information quality, etc. alongside the provision of incentives and subsidies to manufacturing firms undertaking technological innovations and complying with the environmental standards.
Pradeepta Sethi Debkumar Chakrabarti Sankalpa Bhattacharjee
216289319
Financial inclusion, information and communication technology diffusion, and economic growth: a panel data analysis
ABSTRACT Earlier studies accept that both Financial Inclusion (FI) and Information and Communication Technology (ICT) individually play positive role in economic growth. Moreover, ICT applications like mobile phone and internet penetration are being increasingly utilized in banking sector. The present study has shown that ICT development can be an important determinant of Financial Inclusion by using a fixed effect panel data model of 41 countries. The paper further contributes by highlighting the role of FI, powered by a better ICT penetration, in fostering the growth of the countries in a Dynamic Panel Data Model. The results suggest that both FI individually and once coupled with mobile and internet can improve the per capita growth. However, in developing countries, the role of ICT indicators in fostering financial inclusion and therefore growth is not very promising. From the policy perspective, it suggests that more investment in educating people about the usage of ICT in formal banking sector is required.
Inf. Technol. Dev.
Amrita Chatterjee
181455261
The role of stock market and banking sector development, and renewable energy consumption in carbon emissions: Insights from G 7 and N 11 countries
This study probes the role of disaggregated financial development and renewable energy in carbon emissions by incorporating gross fixed capital formation and economic growth in the function of carbon emissions. The financial development is measured through the stock market and banking sector development. We also examine the validity of the EKC hypothesis, using the data of G 7 and N 11 countries spanning from 1990 to 2016. The integration properties of the considered variables are examined through second generation unit roots tests. The Lagrange Multiplier (LM) bootstrap panel cointegration method has confirmed the long run equilibrium relationship among the variables for all the four models used. The long run elasticity results suggest that renewable energy increases environmental quality by reducing carbon emission intensity for both groups of panel countries. Banking development index decreases carbon emissions in G 7 countries, while increases carbon emissions in N 11 countries. Similarly, stock market development index increases carbon emissions in G 7 countries, while decreases in N 11 countries. Overall, economic growth and fixed capital formation impede environmental quality by accelerating the intensity of carbon emissions. This study suggests policy implications based on the empirical results for both groups of countries.
Resources Policy
Muhammad Wasif Zafar Syed Anees Haider Zaidi Avik Sinha Ayfer Gedikli Fujun Hou
159430890
Financial Development and Economic Growth: Panel Evidence From BRICS
Purpose The purpose of this paper is to examine the relationship between financial development and economic growth for five major emerging economies: Brazil, Russia, India, China and South (BRICS) during 1993 to 2014 using banking sector and stock market development indicators. Design/methodology/approach To begin with, the study first examined some of the principal indicators of financial development and macroeconomic variables of the selected economies. Next, using generalized method of moment system estimation (SYS GMM) the relationship between financial development and growth is investigated. The banking sector development indicators used in the study include size of the financial intermediaries, credit to deposit ratio (CDR) and domestic credit to private sector (CPS) whereas the stock market development indicators are value of shares traded and turnover ratio. Also, some macroeconomic control variables such as inflation, exports and the enrolment in secondary education were used. Findings The examination of the principal indicators of financial development and macroeconomic variables have shown considerable differences between the selected economies. Results from the dynamic one step SYS GMM estimates confirm that in presence of turnover ratio, all the selected banking development indicators such as size of financial intermediaries, CDR and CPS are positively significantly determining economic growth. Similarly, in presence of all the selected banking sector development indicators, value of shares traded is found to be positively significantly associated with economic growth. However, the same is not true when turnover ratio is regressed in presence of banking sector variables. Overall, the evidence suggests that banking sector development and stock market development indicators are complementary to each other in stimulating economic growth. Practical implications A positive association between financial development and growth indicates that the policymakers should take necessary measures toward simultaneous development of both banking sector as well as stock market for inducing growth. Originality/value The present paper attempts to examine the relationship between financial development and growth using both banking sector and stock market development indicators which has not been attempted before for BRICS. Also, most of the existing studies are found in case of developed economies. This paper tries to fill this void by studying five major emerging economies.
Journal of Economics, Finance and Administrative Science
Biplab Kumar Guru Inder Sekhar Yadav
203148380
Financial Development, Foreign Banks and Economic Growth in Africa
This study aims to examine and analyze the impact of financial development and foreign bank penetration on African economies. An empirical study for the period 1995 2015 is conducted using the system GMM estimator. Our empirical results indicate that foreign bank entry has a positive and significant impact on economic growth in the countries of North and Southern Africa, while in the other two regions considered in this study (West and Central Africa, East Africa) the impact is negative and rarely significant. In addition, our results show that the development of financial markets has a positive and significant effect on economic growth only in the Southern African region. The paper concludes that policymakers should focus on long term policies to strengthen the financial sector to truly meet the needs of African people.
African Development Review
Younesse El Menyari