Abstract
This article examines how the level of financial development has changed in the ten years between 2008 and 2017 in connection to the most significant events in the global economy and finance and how financial development has influenced economic growth in developing countries. The study measures financial development following the World Bank (2020) approach and using indicators of financial access, financial depth, financial efficiency and financial stability, corresponding to financial institutions and financial markets. Based on a two-way fixed effects model, we find that financial development has positively and significantly contributed to economic growth in these countries during the ten years between 2008 and 2017, through increased access of individual consumers and firms to financial products and services. Other variables such as the depth, efficiency and stability of financial institutions and markets do not correlate significantly with the economic growth of developing countries between 2008 and 2017. This paper concludes that the access to financial institutions for individuals living in developing nations is favourably and significantly connected to economic growth in these countries.
Highlights
1.1 The Importance of Financial Development in Developing CountriesThe level of financial development has great importance for a country
Regarding the depth of financial institutions, which means the size of the financial sector relative to the economy of each country (Imam & Kolerus, 2013), Liberia significantly distanced itself from the other countries with the highest levels of financial institutions’ depth
As shown in the figures above based on the interpretation of the data from the World Bank, the financial development increased in the 25 selected countries during the 2008-2017 timeframe, especially in the areas of the financial institutions access, depth, efficiency, and financial markets access and less so in terms of the financial markets’ depth and efficiency
Summary
1.1 The Importance of Financial Development in Developing CountriesThe level of financial development has great importance for a country. Financial development decreases poverty and inequality by improving access to financing for the poor and vulnerable groups, enabling risk management by lowering their sensitivity to shocks, and boosting investment and productivity, which leads to greater revenue production (Wilson et al, 2012). This subject is especially relevant at the moment because the aftermath of the 2008-2009 global financial crisis and the problems caused by the COVID-19 epidemic, among other factors, have made it difficult for developing nations to obtain financial services and build their financial institutions (Nastu et al, 2021). From a regulatory perspective, the global financial system nowadays is so interconnected that regulatory changes affect advanced and developing countries (World Bank, 2020)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
