Determinants of Financial Development: How Equality of Access Impacts Private Credit

2016 ◽  
Author(s):  
Chase DeHan
Keyword(s):  
Financial Development ◽  
Private Credit ◽  
Equality Of Access

scholarly journals PENGARUH FINANCIAL DEVELOPMENT TERHADAP PERTUMBUHAN EKONOMI DI INDO

2020 ◽  
Vol 2 (1) ◽  
pp. 75
Author(s):  
Nia Putri Kunanti ◽  
Melti Roza Adry
Keyword(s):  
Economic Growth ◽  
Money Supply ◽  
Financial Development ◽  
Linear Regression Analysis ◽  
Trade Openness ◽  
Control Variable ◽  
Secondary Data ◽  
Negative Effect ◽  
Private Credit ◽  
Positive Effect

This study aims to determine how the influence of financial development on economic growth in Indonesia. Financial development indicators are M2 money supply, bank assets, private credit and trade openness. Where inflation and trade openness as a control variable and economic growth as the dependent variable. The data used in this study are secondary data from 2005 quarter 1 to 2018 quarter 4 which were collected through documentation and related agencies. This study uses multiple linear regression analysis and error correction models. The results of this study indicate that: (1) the money supply M2 has a negative effect on economic growth in Indonesia; (2) Bank assets have a negative effect on economic growth in Indonesia; (3) Private credit has a positive effect on economic growth in Indonesia; (4)) trade openness has a positive effect on economic growth in Indonesia.

scholarly journals The Financial Development And Economic Growth Nexus: The Role Of Saudi Arabian Financial Institutions

2019 ◽  
Vol 4 (6) ◽  
Author(s):  
Adel Bogari
Keyword(s):  
Economic Growth ◽  
Saudi Arabia ◽  
Financial Development ◽  
Financial Institutions ◽  
Generalized Method Of Moments ◽  
Democratic Accountability ◽  
Law And Order ◽  
Private Credit

The purpose of this paper is to assess the effects of the financial development and the financial institutions quality on the economic growth for the Saudi Arabia. Using generalized Method of Moments (GMM) with a dynamic panel framework, this paper employs different measures of financial development namely the Liquid liabilities (LIQ), Private credit by deposit money banks and other financial institutions (CRE) and Central bank assets (ASS), and for financial institutions quality including socioeconomic conditions, investment profile, law and order, corruption, external conflicts and democratic accountability. For the period (1990-2017), our findings strongly support the hypothesis that financial development leads to growth in the Saudi Arabia. Moreover, empirical results support a positive and significant relationship observed between financial institutions quality and growth. The findings of this paper suggest the need to give more support to the financial development for Saudi Arabia banking that have been launched in the country since the last three decades and to improve the role played by the financial institutions to stimulate saving/investment and, consequently, long-term economic growth.  

FDI outflows, exports and financial development

2017 ◽  
Vol 44 (6) ◽  
pp. 987-1002 ◽  
Author(s):  
Long Zhao ◽  
Zuanshi Liu ◽  
William Wei ◽  
Bernadette Andreosso-O’Callaghan
Keyword(s):  
Financial Development ◽  
Financial System ◽  
Developed Countries ◽  
Theory Model ◽  
Production Model ◽  
Trade Theory ◽  
Content Type ◽  
Private Credit ◽  
Current Account Imbalances ◽  
New Perspective

Purpose The purpose of this paper is to argue that financial development, measured by private credit in the economy, affects exports in an inverted U-shaped manner. The authors use the new trade theory model and empirical data to analyze whether the financial system is the reason of global imbalance. Design/methodology/approach This paper builds a simple production model to connect financial development with a country’s export or outward foreign direct investment (ODI) decision. Using a panel data covering 108 countries for the period 1990-2011, the authors find strong evidence to show that when a country is at a lower financial development level, further advancements of its financial system will boost exports. Findings First, an inverted U-shaped relationship between exports, imports and financial development is found in the study of 108 countries over the period 1990-2011; second, ODI provides a substitute effect to exports for financially advanced countries. These findings have provided an alternative explanation to international trade imbalances and contribute constructively to the discussion regarding whether exports and financial development are positively related or not. Originality/value As a result, the findings shed some light on the issue of global current account imbalances between developing and developed countries from a new perspective.

scholarly journals The role of finance in inclusive human development in Africa revisited

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Simplice Asongu ◽  
Rexon Nting
Keyword(s):  
Human Development ◽  
Financial Development ◽  
Fixed Effects ◽  
Generalized Method Of Moments ◽  
African Countries ◽  
Content Type ◽  
Credit Bureaus ◽  
Public Credit ◽  
Private Credit

PurposeThis study aims to investigate the direct and indirect linkages between financial development and inclusive human development in African countries.Design/methodology/approachThe study employs a battery of estimation techniques, notably: two-stage least squares, fixed effects, generalized method of moments and Tobit regressions. The dependent variable is the inequality adjusted human development index. All dimensions of the Financial Development and Structure Database of the World Bank are considered.FindingsThe main finding is that financial dynamics of depth, activity and size improve inclusive human development, whereas the inability of banks to transform mobilized deposits into credit for financial access negatively affects inclusive human development.Practical implicationsPolicies should be tailored to improve mechanisms by which credit facilities can be provided to both households and business operators. Surplus liquidity issues resulting from the inability of banks to transform mobilized deposits into credit can be resolved by enhancing the introduction of information sharing offices (like public credit registries and private credit bureaus) that would reduce information asymmetry between lenders and borrowers.Originality/valueThis study complements the extant literature by assessing the nexus between financial development and inclusive human development in Africa.

scholarly journals FINANCIAL DEVELOPMENT, SHOCKS, AND GROWTH VOLATILITY

2013 ◽  
Vol 18 (3) ◽  
pp. 651-688 ◽  
Author(s):  
Debdulal Mallick
Keyword(s):  
Business Cycle ◽  
Financial Development ◽  
Growth Models ◽  
Unified Framework ◽  
Country Level ◽  
Long Run ◽  
Private Credit ◽  
The Business Cycle ◽  
Growth Volatility ◽  
Endogenous Growth Models

This paper uses spectral theory to develop the following two testable hypotheses in a unified framework for the predictions of business-cycle and endogenous growth models: (i) financial development affects only business-cycle volatility; and (ii) shocks affect both business-cycle volatility and long-run volatility of GDP growth. In other words, volatility caused by shocks is more persistent than that caused by financial underdevelopment. We decompose the business-cycle and long-run volatility by the spectral method and then test the hypotheses at the cross-country level. Empirical evidence provides support for both hypotheses. Higher private credit, a bank-based measure of financial development, dampens business-cycle volatility but not long-run volatility. Volatility of shocks, as measured by the volatility of changes in the terms of trade, magnifies both business-cycle and long-run volatility. The results are robust to accounting for endogeneity, a market-based measure of financial development, and an alternative method of volatility decomposition.

scholarly journals Does Financial Development Reduce the Poverty Gap?

2021 ◽  
Author(s):  
Jakob de Haan ◽  
Regina Pleninger ◽  
Jan-Egbert Sturm
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Financial Development ◽  
Indirect Effect ◽  
Fixed Effects ◽  
Poverty Line ◽  
Financial Instability ◽  
Composite Measure ◽  
Baseline Model ◽  
Private Credit

AbstractFinancial development may affect poverty directly and indirectly through its impact on income inequality, economic growth, and financial instability. Previous studies do not consider all these channels simultaneously. To proxy financial development, we use the ratio of private credit to GDP or an IMF composite measure. Our preferred measure for poverty is the poverty gap, i.e. the shortfall from the poverty line. Our fixed effects estimation results for an unbalanced panel of 84 countries over the 1975–2014 period suggest that financial development does not have a direct effect on the poverty gap. However, as financial development leads to greater inequality, which, in turn, results in more poverty, financial development has an indirect effect on poverty through this transmission channel. Only if we use poverty lines of $3.20 or $5.50 (instead of $1.90 a day as in our baseline model) to define the poverty gap, we find that economic growth reduces poverty. This implies that in those cases the overall effect of financial development on poverty may be positive or negative, depending on which indirect effect, i.e. that of income inequality or growth, is stronger. Financial instability does not seem to affect the poverty gap. These results are consistent across various robustness checks.

scholarly journals Financial Development, Exchange Rate Fluctuations and Debt Dollarization

2019 ◽  
Vol 19 (168) ◽  
Author(s):  
Minsuk Kim
Keyword(s):  
Exchange Rate ◽  
Financial Development ◽  
Emerging Market ◽  
Exchange Rate Volatility ◽  
Portfolio Allocation ◽  
Allocation Model ◽  
Exchange Rate Fluctuations ◽  
Private Credit ◽  
Currency Composition ◽  
Nonfinancial Firms

This paper examines how financial development influences the debt dollarization of nonfinancial firms in a sample of emerging market economies (EMEs). The macroeconomic channels are identified from an optimal portfolio allocation model and assessed empirically using the accounting information of nonfinancial firms from 21 EMEs during 2009–2017. The results show that financial development, measured by the private credit-to-GDP ratio, mainly reduces the influence of exchange rate volatility in determining a firm's debt currency composition, among other channels. Furthermore, the effect of exchange rate volatility becomes statistically insignificant beyond an estimated threshold credit-to-GDP ratio of 100 percent.

scholarly journals Does Financial Development Lead to Poverty Reduction in China? Time Series Evidence

2017 ◽  
Vol 9 (1) ◽  
pp. 99 ◽  
Author(s):  
Sin-Yu Ho ◽  
Bernard Njindan Iyke
Keyword(s):  
Time Series ◽  
Financial Development ◽  
Poverty Reduction ◽  
Financial Sector ◽  
Consumption Expenditure ◽  
Causality Test ◽  
Reduction Strategies ◽  
Private Credit ◽  
Per Capita ◽  
The Impact

The impact of financial development on poverty reduction has received attention in the literature recently. While the connection between financial development and poverty may appear straight forward in theory, in empirics it may be much complicated. This study attempted at empirically assessing the causal links between financial development and poverty reduction in China for the period 1985–2014. The study used the Toda-Yamamoto causality test to avoid pretesting bias that has featured majority of the existing studies. The study utilized two standard proxies for financial development, namely: the domestic private credit by banks as percentage of GDP, and money supply (M2) as percentage of GDP; and a standard proxy for poverty reduction namely: the household final consumption expenditure per capita growth (annual percentage). The study found a bidirectional causal flow between financial development and poverty reduction, implying that the causal flow between these important variables is independent of the proxy for financial development. This means that financial sector reforms and poverty reduction programs are more of “win-win” strategies in the case of China. Therefore policymakers in China should continue to implement robust financial sector reforms and poverty reduction strategies.

scholarly journals Does Financial Development Lead to Poverty Reduction in China? Time Series Evidence

2017 ◽  
Vol 9 (1(J)) ◽  
pp. 99-112
Author(s):  
Sin-Yu Ho ◽  
Bernard Njindan Iyke
Keyword(s):  
Time Series ◽  
Financial Development ◽  
Poverty Reduction ◽  
Financial Sector ◽  
Consumption Expenditure ◽  
Causality Test ◽  
Reduction Strategies ◽  
Private Credit ◽  
Per Capita ◽  
The Impact

The impact of financial development on poverty reduction has received attention in the literature recently. While the connection between financial development and poverty may appear straight forward in theory, in empirics it may be much complicated. This study attempted at empirically assessing the causal links between financial development and poverty reduction in China for the period 1985–2014. The study used the Toda-Yamamoto causality test to avoid pretesting bias that has featured majority of the existing studies. The study utilized two standard proxies for financial development, namely: the domestic private credit by banks as percentage of GDP, and money supply (M2) as percentage of GDP; and a standard proxy for poverty reduction namely: the household final consumption expenditure per capita growth (annual percentage). The study found a bidirectional causal flow between financial development and poverty reduction, implying that the causal flow between these important variables is independent of the proxy for financial development. This means that financial sector reforms and poverty reduction programs are more of “win-win” strategies in the case of China. Therefore policymakers in China should continue to implement robust financial sector reforms and poverty reduction strategies.

scholarly journals Financial Development, Financial Inclusion and Primary Energy Use: Evidence from the European Union Transition Economies

Energies ◽  
2021 ◽  
Vol 14 (12) ◽  
pp. 3638
Author(s):  
Yilmaz Bayar ◽  
Mehmet Hilmi Ozkaya ◽  
Laura Herta ◽  
Marius Dan Gavriletea
Keyword(s):  
European Union ◽  
Financial Development ◽  
Financial Institutions ◽  
Energy Use ◽  
Panel Cointegration ◽  
Primary Energy ◽  
Development Index ◽  
Development Indicators ◽  
Private Credit ◽  
Financial Development Index

The main objective of the research is to analyze the impact of financial sector development indicators and financial institutions access on primary energy use based on a sample of European Union transition members over 20 years period (1996–2017) through panel cointegration and causality tests that allow for cross-section dependence. The causality analysis revealed that the direction of the causality among financial development indicators, financial institutions access, and primary energy use varied among the countries. On the other side, panel cointegration coefficients disclosed that the financial development index positively affected the primary energy use, but private credit did not have a significant effect on the primary energy use. Furthermore, financial institutions’ access had a significant negative impact on primary energy use. However, country-level cointegration coefficients indicated that the financial development index positively affected the primary energy use in Bulgaria, Croatia, Czechia, Hungary, and Slovenia, and private credit also had a positive impact on primary energy use in Bulgaria, Czechia, Estonia, Hungary, Lithuania, Poland, and Slovakia, but the effect of financial development index on primary energy use was found to be very higher than that of private credit. Moreover, financial institutions’ access negatively affected the primary energy use in Croatia, Estonia, Hungary, Poland, and Romania.

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