Do Globalization and Institutional Reforms Matter for Financial Structure in Selected Asian Countries? A Panel Data Approach

2019 ◽  
Vol 65 (2) ◽  
pp. 87-100
Author(s):  
Madhu Sehrawat ◽  
A. K. Giri
Keyword(s):  
Panel Data ◽  
Financial Development ◽  
Ordinary Least Squares ◽  
Institutional Reforms ◽  
Panel Causality ◽  
Dynamic Relationship ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Integration Test ◽  
Dynamic Ols

Abstract This present study aims to examine the dynamic relationship between globalization, institutional reforms, and financial development in the context of South Asian economies over the period 1985–2015 by employing panel data methods. The Westerlund (2007) panel co-integration test result indicates that there exists a long-run equilibrium relationship between globalization, institutional reforms, and financial development. The findings of panel dynamic ordinary least squares (PDOLS) indicate that the effect of globalization is positive and statistically significant to financial development. Furthermore, the empirical evidence of a dynamic panel error-correction model reveals a unidirectional causal relationship running from globalization and institutional reform to financial development. In terms of policy recom-mendations, the study suggests that it is vital to focus on globalization and institutional reforms to promote effectiveness of the financial system and economic performance in the region. JEL Classifications: F19, G29 globalization, institutional reforms, South Asia, Panel Dynamic OLS (PDOLS), panel causality

Financial development and poverty reduction: panel data analysis of South Asian countries

2016 ◽  
Vol 43 (4) ◽  
pp. 400-416 ◽  
Author(s):  
Madhu Sehrawat ◽  
A K Giri
Keyword(s):  
Panel Data ◽  
Financial Development ◽  
South Asian ◽  
Poverty Reduction ◽  
Causality Test ◽  
Panel Causality ◽  
Content Type ◽  
Long Run ◽  
Integration Test ◽  
Asian Economies

Purpose – The purpose of this paper is to examine the contribution of financial development to poverty reduction in 11 South Asian developing countries using panel data set over the time period 1990-2012. Design/methodology/approach – The stationarity properties are checked by using Levin-Lin-Chu and Im-Pesaran-Shin panel unit root tests. The paper applied the Pedroni’s panel co-integration test to examine the existence of long-run relationship. The coefficients of co-integration are examined by fully modified OLS (FMOLS) and the causal link is checked by panel causality test. Findings – The empirical results of Pedroni co-integration test confirm a long-run relationship between financial development and poverty reduction in South Asian developing economies. The findings of FMOLS method confirm a strong and positive relationship between financial development, trade openness, inflation and poverty reduction. Results of panel causality test indicate that there is a unidirectional causality running from financial development to poverty reduction variable. Research limitations/implications – The present study recommends appropriate economic and financial reforms focussing on financial inclusion to reduce poverty in selected South Asian economies. Originality/value – This paper is the first of its kind to empirically examine the causal relationship between financial sector development and poverty reduction in South Asian economies using modern econometric techniques.

scholarly journals The effect of financial development on income inequality in Turkey: An estimate of the Greenwood-Jovanovic hypothesis

2019 ◽  
Vol 19 (4) ◽  
pp. 319-344
Author(s):  
Emrah Koçak ◽  
Nısfet Uzay
Keyword(s):  
Income Inequality ◽  
Least Squares ◽  
Linear Relationship ◽  
Financial Development ◽  
Structural Breaks ◽  
Ordinary Least Squares ◽  
Financial Indicators ◽  
Long Run ◽  
Integration Test ◽  
Robustness Check

Abstract This paper is the first to examine the linear and nonlinear effect of financial development on income inequality in Turkey over the period of 1980-2013. Financial development is represented by disaggregated and aggregated indicators. In this way, the effects of various financial indicators on income inequality are explained. Maki (2012) structural breaks co-integration test, and Stock and Watson (1993) dynamic ordinary least squares (DOLS) methods are followed for empirical analysis. Finally, the fully modified least squares (FM-OLS) regression analysis method developed by Philips and Hansen (1990) is used for robustness check. The estimation results of the linear relationship indicate that financial development is a mitigating effect on income inequality. These results support the inequality-narrowing hypothesis. The non-linear relationship results show that financial development first increases income inequality but after financial development reaches a certain level, this effect is reversed and financial development reduces income inequality. These results support the Greenwood-Jovanovic hypothesis. All the results strongly suggest that financial development is a mitigating or improving effect on income inequality over the long-run.

The role of financial development in economic growth: empirical evidence from Indian states

2015 ◽  
Vol 10 (4) ◽  
pp. 765-780 ◽  
Author(s):  
Madhu Sehrawat ◽  
A K Giri
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Ordinary Least Squares ◽  
Annual Data ◽  
Indian States ◽  
Content Type ◽  
Long Run ◽  
Panel Granger Causality ◽  
Integration Test

Purpose – The purpose of this paper is to examine the relationship between financial development and economic growth in Indian states using annual data from 1993 to 2012. Design/methodology/approach – The stationarity properties are checked by Levin-Lin-Chu and Im-Pesaran-Shin panel unit root tests. The study employed the Pedroni’s panel co-integration test to examine the existence of long-run relationship and the coefficients of co-integration are examined by fully modified ordinary least squares. The short term and long-run causality is checked by panel granger causality. Findings – The co-integration test confirms a long-run relationship between financial development and economic growth for Indian states. The results support the supply leading hypothesis and highlight the importance of financial development in economic growth in Indian states. The findings also indicate that bank-centric financial sector of India has the potential of economic growth through credit transmission. Research limitations/implications – The present study recommends for appropriate reforms in financial market to attain economic growth in India. The findings will be useful for India’s policymakers in order to maintain the parallel expansion of financial development and economic growth. Originality/value – Till date, there is no study that includes all 28 states in analyzing the role of financial development in economic growth for Indian economy by applying latest econometric techniques. Further, the study uses gross domestic state product instead of net domestic state product as proxy for economic growth because of the presence of different depreciation rates.

The impact of financial development on economic growth

2016 ◽  
Vol 11 (4) ◽  
pp. 569-583 ◽  
Author(s):  
Madhu Sehrawat ◽  
A.K. Giri
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Structural Breaks ◽  
Regional Cooperation ◽  
Ordinary Least Squares ◽  
Annual Data ◽  
Content Type ◽  
Long Run ◽  
Integration Test ◽  
The Impact

Purpose The purpose of this paper is to investigate the possible co-integration and the direction of causality between financial development and economic growth in South-Asian Association for Regional Cooperation (SAARC) countries using annual data from 1994 to 2013. Design/methodology/approach The Carrion-i-Silvestre et al. (2005) stationarity test with structural breaks is used to check the stationarity. The Westerlund (2006) panel co-integration test is employed to examine the long-run relationship among the variables. To carry out tests on the co-integrating vectors, fully modified ordinary least squares (FMOLS) and PDOLS techniques are used and panel Granger causality test is used to examine the direction of the causality. Findings The Westerlund (2006) panel co-integration test confirms the existence of the long-run relationship between financial development and economic growth for SAARC countries. The coefficients of FMOLS and DOLS indicate that index of financial development (IFD) and trade openness supports economic growth in SAARC region. In the short-run, there is unidirectional causality running from IFD to economic growth. Research limitations/implications In the view of these findings it is recommended that countries in the region should adopt policies geared toward financial sector development to attain high economic growth. Originality/value To the best of the author’s knowledge, no studies have looked into SAARC countries to study the relationship between financial development and economic growth, this study is the first of its kind.

scholarly journals Foreign Direct Investment, Financial Development and Economic Growth Evidence from Saudi Arabia

2017 ◽  
Vol 8 (4) ◽  
pp. 228 ◽  
Author(s):  
Najeeb Muhammad Nasir ◽  
Mohammed Ziaur Rehman ◽  
Nasir Ali
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Financial Development ◽  
Direct Investment ◽  
Impulse Response Function ◽  
Saudi Arabian ◽  
Causality Test ◽  
Long Run ◽  
Oil Resources ◽  
Integration Test

This study is an effort to explain and establish a relationship among foreign direct investment, financial development and economic growth in Saudi Arabian context for the period of 1970 to 2015 by employing Vector Auto Regression (VAR) and modified Granger Casualty Models. The result of Johansen co-integration test illustrates that no long run co-integration can be established among the variables. VAR has established a link between economic growth, financial development and foreign direct investment. The Granger causality test also confirms that economic growth causes foreign direct investment and financial development which is a unidirectional causality running from economic growth towards foreign direct investment and financial development. No significant causality can be observed empirically between foreign direct investment and financial development. This feature can be attributed to the fact that Saudi Arabian economy is still heavily dependent on its oil resources which is the driving force behind growth. Impulse Response Function has been utilized in order to observe the response to the shocks among the variables.

scholarly journals The Impact of Industrialization, Trade Openness, Financial Development, and Energy Consumption on Economic Growth in Indonesia

Economies ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 174
Author(s):  
Khalid Eltayeb Elfaki ◽  
Rossanto Dwi Handoyo ◽  
Kabiru Hannafi Ibrahim
Keyword(s):  
Economic Growth ◽  
Energy Consumption ◽  
Least Squares ◽  
Financial Development ◽  
Correction Term ◽  
Trade Openness ◽  
Ordinary Least Squares ◽  
Distributed Lag ◽  
Long Run ◽  
The Impact

This study aimed to scrutinize the impact of financial development, energy consumption, industrialization, and trade openness on economic growth in Indonesia over the period 1984–2018. To do so, the study employed the autoregressive distributed lag (ARDL) model to estimate the long-run and short-run nexus among the variables. Furthermore, fully modified ordinary least squares (FMOLS), dynamic least squares (DOLS), and canonical cointegrating regression (CCR) were used for a more robust examination of the empirical findings. The result of cointegration confirms the presence of cointegration among the variables. Findings from the ARDL indicate that industrialization, energy consumption, and financial development (measured by domestic credit) positively influence economic growth in the long run. However, financial development (measured by money supply) and trade openness demonstrate a negative effect on economic growth. The positive nexus among industrialization, financial development, energy consumption, and economic growth explains that these variables were stimulating growth in Indonesia. The error correction term indicates a 68% annual adjustment from any deviation in the previous period’s long-run equilibrium economic growth. These findings provide a strong testimony that industrialization and financial development are key to sustained long-run economic growth in Indonesia.

scholarly journals THE EFFECT OF SAVING AND CAPITAL EXPANSION ON FINANCIAL AND TECHNOLOGICAL DEVELOPMENT IN GCC COUNTRIES

2021 ◽  
Vol 0 (0) ◽  
pp. 1-25
Author(s):  
Faris Alshubiri
Keyword(s):  
Least Squares ◽  
Financial Development ◽  
Technological Development ◽  
National Income ◽  
Ordinary Least Squares ◽  
Growth Strategy ◽  
Causality Test ◽  
Gcc Countries ◽  
Causal Direction ◽  
Long Run

This study examined the effect of the relationship between saving and capital expansion on financial and technological development in three GCC countries using panel data from 1990 to 2019. The study used panel least squares, feasible general least squares, dynamic ordinary least squares and fully modified ordinary least squares used in the study. The findings showed that there was a significant positive long-run relationship between capital expansion and financial development and was a positive and insignificant long-run relationship between saving and financial development. Conversely, the study showed that there was a significant positive long-run relationship between saving and technological development. Meanwhile, there was a negative long-run relationship between capital expansion and technological development. Pairwise Granger causality test results showed that there was bidirectional causality between saving and financial development, a single causal direction from Adjusted net national income and financial development and a single causal direction from technological development and saving and Inflation, consumer prices. The main conclusions of the study were saving tends to support technological development, while investment tends to improve financial development. Therefore, GCC countries should formulate a long-term growth strategy in all sectors to determine their development requirements in light of the available resources.

The impact of economic and financial development on environmental degradation

2015 ◽  
Vol 32 (4) ◽  
pp. 485-502 ◽  
Author(s):  
Samia Nasreen ◽  
Sofia Anwar
Keyword(s):  
Panel Data ◽  
Financial Development ◽  
Environmental Degradation ◽  
Low Income ◽  
Ordinary Least Squares ◽  
Dynamic Panel Data ◽  
High Income ◽  
Empirical Literature ◽  
Content Type ◽  
The Impact

Purpose – The purpose of this study is to validate the impact of economic and financial development along with energy consumption on environmental degradation using dynamic panel data models for the period 1980-2010. The study uses three sub-panels constructed on the basis of income level to make panel data analysis more meaningful. Design/methodology/approach – Larsson et al. panel cointegration technique, fully modified ordinary least squares and vector error correction model causality analysis are applied for empirical estimation. Findings – Main empirical findings demonstrate that financial development reduces environmental degradation in the high-income panel and increases environmental degradation in the middle- and low-income panels. Hypothesis of the environmental Kuznets curve is accepted in all income panels. Granger causality results show the evidence of bidirectional causality between financial development and CO2 emission in the high-income panel, and unidirectional causality from financial development to CO2 emission in the middle- and low-income panels. Originality/value – In empirical literature, only a few studies explain the effect of financial development on environment. The present study is an effort to fill this gap by exploring the effect of economic and financial development on environmental degradation.

Correlations between energy consumption per capita, growth rate, industrialisation, trade volume and urbanisation: the case of Turkey

2018 ◽  
Vol 4 (10) ◽  
pp. 118-127
Author(s):  
Funda Yurdakul
Keyword(s):  
Growth Rate ◽  
Energy Consumption ◽  
Least Squares ◽  
Ordinary Least Squares ◽  
Trade Volume ◽  
Long Run ◽  
Turkish Economy ◽  
Equilibrium Relationship ◽  
Per Capita ◽  
Relationship Of

This study examines the relationship of energy consumption per capita with growth rate, industrialisation, trade volume and urbanisation in Turkish economy throughout the 1980–2015 period using the Engle-Granger, Fully modified ordinary least squares (FMOLS), canonical cointegration regression (CCR) and dynamic ordinary least squares (DOLS) methods. Analysis results revealed a long-run equilibrium relationship between the change in energy consumption per capita and growth rate, industrialisation, trade volume and urbanisation. Urbanisation, industrialisation, growth rate and trade volume positively influence the change in energy consumption per capita. Keywords: Energy consumption, Engle-Granger method, fully modified ordinary least squares (FMOLS) method, canonical cointegration regression (CCR), dynamic ordinary least squares (DOLS) method.

scholarly journals Re-visiting the renewable energy–economic growth nexus

2017 ◽  
Vol 11 (3) ◽  
pp. 387-403 ◽  
Author(s):  
Oluwafisayo Alabi ◽  
Ishmael Ackah ◽  
Abraham Lartey
Keyword(s):  
Economic Growth ◽  
Renewable Energy ◽  
Ordinary Least Squares ◽  
Renewable Energy Consumption ◽  
Content Type ◽  
Dynamic Relationship ◽  
Long Run ◽  
Short Run ◽  
Opec Member ◽  
The Relationship

Purpose This paper aims to investigate the dynamic relationship between renewable energy and economic growth in African OPEC member countries (Angola, Algeria and Nigeria). Design/methodology/approach The fully modified ordinary least squares technique for heterogeneous cointegrated panels (Pedroni, 2000) is used to estimate the parameters of the model. Findings The study revealed four main findings. First, there is a bidirectional causality between renewable energy and economic growth in the long and the short run. Second, a bidirectional causality exists between non-renewable energy and economic growth in the short and long run. Third, a bidirectional causality exists between CO2 emissions and economic growth. Fourth, a unidirectional causality was also found between CO2 emissions and non-renewable energy consumption with the direction of causality stemming from the consumption of non-renewable energy to CO2 emissions. Practical implications Because renewable consumption enhances growth, OPEC-member Africa countries should encourage investment in modern renewable sources that has high conversion efficiency such as solar, wind and hydro to strengthen their response to mitigating the impacts of climate change. Originality/value This study applies multiple methods to analyze the relationship between renewable energy and economic growth in African OPEC countries.

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