Banking sector development and economic growth in ARF countries: the role of stock markets

2014 ◽  
Vol 7 (2) ◽  
pp. 208-229 ◽  
Author(s):  
Rudra P. Pradhan ◽  
Sasikanta Tripathy ◽  
Shashikant Pandey ◽  
Samadhan K. Bele
Keyword(s):  
Economic Growth ◽  
Stock Markets ◽  
Banking Sector ◽  
Banking Sector Development

scholarly journals The impact of banking sector development on economic growth: Comparative analysis of Ukraine and some EU countries

2021 ◽  
Vol 18 (2) ◽  
pp. 193-208
Author(s):  
Nadiya Rushchyshyn ◽  
Olha Mulska ◽  
Yuliia Nikolchuk ◽  
Mariia Rushchyshyn ◽  
Taras Vasyltsiv
Keyword(s):  
Economic Growth ◽  
Banking Sector ◽  
Principal Component ◽  
Causality Analysis ◽  
Eu Countries ◽  
Banking Sector Development ◽  
Reverse Relationship ◽  
The Stability ◽  
The Impact

The effective functioning of the banking sector has a key impact on the stability of economic growth. The study is aimed at monitoring the banking sector development and identifying causality between the banking sector and economic growth. The methodological tools of the research are Principal component analysis, causal relationship, and vector regression modeling. The empirical study is based on the World Bank databank by eight components (for integral analysis) and seven indicators (for causality analysis). The study presents an improved algorithm for monitoring the level of banking sector development based on calculating the integral coefficient. According to assessment, the level of banking sector development and realization of its potential in Ukraine is low and significantly inferior to the EU countries; in 2000–2019, the development of the banking sector in Ukraine was 0.061-0.153. The results obtained confirmed the large discrepancy in the development of Ukraine’s banking sector with some EU countries (the highest lag values were observed with the Czech Republic and Poland). The causality analysis revealed a strong favorable relationship between the level of development of the banking sector in Ukraine and GDP per capita (0.796), a moderate one – with foreign direct investment (0.400), and a reverse relationship with the level of national poverty (0.678). This study is of practical value for identifying two possible trajectories of a country’s development, namely, sustainable development and economic turbulence, and has allowed forming a conceptual vision of the role of the banking sector in achieving social and economic goals.

scholarly journals RELATIONSHIP BETWEEN THE STOCK MARKET DEVELOPMENT, BANKING SECTOR DEVELOPMENT AND ECONOMIC GROWTH IN THE CEE COUNTRIES

2021 ◽  
Vol 7 (3) ◽  
pp. 118-126
Author(s):  
Lidiya Yemelyanova
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Stock Markets ◽  
Banking Sector ◽  
Market Development ◽  
Stock Market Development ◽  
Market Capitalization ◽  
Banking Sector Development ◽  
The Impact ◽  
Stock Market Capitalization

The stock markets of most CEE countries have been actively developing and improving over the past decades but they still do not belong to the developed markets according to MSCI classification, the financial systems of these countries tends towards the bank-oriented type. Does the level of stock market development affect economic growth in CEE countries and do these countries need to develop their stock markets accordingly? The purpose of this article is to identify the direction of the causal link between stock market development, banking sector development and economic growth in Central and Eastern European (CEE) countries. The subject of the research is the relationship between the stock market development, banking sector development and economic growth in the CEE countries. Methodology. The research is based on the annual data for two time periods 1999-2012 and 1999-2015 for the 8 and 5 CEE countries, respectively. The study is based on the Granger causality test and linear regression models. According to results of the research the stock market development plays an important role in attracting foreign direct investment and economic growth in CEE countries in the long-run period. There are revealed the channels of indirect influence of the stock market capitalization on the economic growth. Stock market capitalization has impact on the banking sector and gross capital formation, which in turn have impact on the economic growth of CEE countries. There is the impact of both the stock market and the banking sector development on the economic growth in CEE countries during 1999-2015. However, the impact of the stock market size on the economic growth is positive and the impact of domestic credit to private sector is negative. Practical implications. The study proves the reasonable need for the CEE countries to move towards further development of the stock market, improving the market infrastructure and institutional environment in order to expand the size of the stock market and thereby contribute to the economic growth of this countries. Value/originality. The obtained conclusion about the role of the stock market in economic growth and attraction of FDI is of great importance both for Ukraine and other countries with similar trajectory of economic development in general and similar historical aspects of the origin of stock markets in particular and should be taken into account by state leaders when making decisions on the need to create conditions for development of such element of the country’s financial system as the stock market.

scholarly journals Banking Sector Development, Inflation and Economic Growth in Asian Countries: A Panel Causality and Co-Integration Approach

2018 ◽  
Vol 8 (4) ◽  
pp. 384
Author(s):  
Muhammad Imran Nazir ◽  
Rehana Tabassam ◽  
Ifran Khan ◽  
Muhammad Rizwan Nazir
Keyword(s):  
Economic Growth ◽  
Banking Sector ◽  
Vital Role ◽  
Least Square ◽  
Policy Implications ◽  
Asian Countries ◽  
Ordinary Least Square ◽  
Long Run ◽  
Banking Sector Development ◽  
Integration Test

This study investigates the causal relationship between banking sector development, inflation, and economic growth for six Asian countries (Bangladesh, China, India, Malaysia, Pakistan and Sri Lanka) over the period of 1970-2016. Using a Pedroni panel, Kao co-integration test, Panel Granger causality-based Error Correction Model, Dynamic ordinary least square (DOLS), and Fully modified ordinary least square (FMOLS), this study finds that the development of the banking sector generally has a positive relationship with economic growth in the long-run. This results show that in the long-run, monetary policy play a vital role in the economic growth. This study also confirmed the response causality between the indicators of banking sector development and economic growth. Based on the empirical findings, this research provides important policy implications to the banking sector and economic supervisory bodies in order to achieve the long run economic growth.

The nexus of economic growth, priority sector lending and non-performing assets: case of Indian banking sector

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dolly Gaur ◽  
Dipti Ranjan Mohapatra
Keyword(s):  
Economic Growth ◽  
Banking Sector ◽  
Dynamic Panel ◽  
Content Type ◽  
Generalized Methods Of Moments ◽  
Major Increase ◽  
Dynamic Panel Regression ◽  
Methods Of Moments ◽  
The Impact

PurposeIn recent years, the Indian banking sector is facing a major cause of concern in the form of Nonperforming Assets (NPA), and the priority sector lending (PSL) is generally recognized as the major factor contributing to it. Thus, the present study has been carried out with the objective of examining the relationship between priority sector lending and GDP growth. Thereafter, the role of PSL and certain other bank-specific, industry-specific and macroeconomic variables in determining NPA has been studied.Design/methodology/approachTaking a sample of 45 scheduled commercial banks, the study has been carried out for 14 years (2004–2018). Granger causality between PSL and GDP has been examined by applying the Dumitrescu-Hurlin test. For the purpose of investigating the impact of PSL and other determinants on NPA, both static and dynamic panel regression have been performed. Under the dynamic panel, system generalized methods of moments (S-GMM) approach has been followed.FindingsThe findings show that there exists a positive correlation and bidirectional causal relationship between PSL and GDP, which implies that PSL brings additional growth for the whole economy. In addition to it, PSL is found to be insignificant for the NPA ratio, and thus, it can be inferred that credit extended to government-specified sectors does not bring any major increase in the bad loan portfolio of banks.Practical implicationsThe policymakers and bank management can take a cue from the findings of this study to decrease the exposure to loan nonrepayment issue. The priority sectors are in need of formal credit for their growth, and since the rising population of the country can find employment in these sectors, banks should meet their credit needs while securing their position with regard to the NPA problem.Originality/valueThe issue of NPA determinants, and in particular, the contribution of priority sector lending in it has not been much explored for Indian banking sector. Also, the present study adds to the literature by using the causality approach for examining the importance of directed credit schemes for economic growth.

scholarly journals BANKING SECTOR LIBERALIZATION AND ECONOMIC GROWTH: CASE STUDY OF PAKISTAN

2016 ◽  
Vol 17 (1) ◽  
pp. 125-139 ◽  
Author(s):  
Najia SAQIB
Keyword(s):  
Economic Growth ◽  
Banking Sector ◽  
Time Series Data ◽  
Series Data ◽  
Omitted Variables ◽  
Financial Systems ◽  
Long Run ◽  
Banking Sector Development ◽  
The Impact

Economic theory suggests that sound and efficient financial systems channel capitals to its most productive uses are beneficial for economic growth. Sound and efficient financial systems are especially important for sustaining growth in developing countries. This paper examines the impact of banking sector liberalization on long-term economic growth in Pakistan by using a time series data for the period 1971–2011. The results show that there exist a significant positive long run relationship between banking sector development and economic growth in the country. The sensitivity analysis also shows that the relationship remain positive and significant no matter what combination of the omitted variables are used in the basic model. Thus, our findings support the core idea that banking sector development stimulates long term economic growth in a country.

scholarly journals THE ROLE OF BANKS AND SECURITIES MARKETS IN THE POST-TRANSITION ECONOMIES OF EASTERN EUROPE

2020 ◽  
Author(s):  
Sasho Arsov
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Eastern Europe ◽  
Banking Sector ◽  
Positive Impact ◽  
Financial Sector ◽  
Securities Markets ◽  
Positive Role ◽  
The Impact

Economic theory predicts that the development of the financial sector should have a positive impact on the overall economic development. Research has predominantly confirmed this expectation, with the remark that at earlier stages of economic development this impact should be higher, while a disproportionate banking sector has detrimental effect on growth through its impact on attracting highly skilled workforce, increased presence of moral hazard and the associated banking crises. This issue has been studied only occasionally in the case of the former socialist economies of Central and Eastern Europe and the former USSR. This paper represents an attempt to analyze the impact of the banking sector and securities markets development on the economic growth of these countries. A sample of 22 countries is assembled, using data from 1995 to 2018 and a panel regression and a GMM technique are used to derive conclusions on the researched topic. The analysis has shown that the banking sector has played a positive role in the economic growth throughout the analyzed period, while the role of the stock market is not significant. This is in line with the previous studies which have confirmed that the positive role of the securities markets should be expected only at higher levels of economic development. Also, the impact of the overall financial sector is deemed to be positive.

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