Financial Development In Countries Research Articles

Convergence patterns in financial development: evidence from club convergence

This article analyzes the degree of convergence of financial development for a panel of 50 countries. We apply the methodology of Phillips and Sul (Econometrica 75:1771–1855, 2007) to various indicators of financial development to assess the existence of convergence clubs. We consider ten alternative indicators of financial development that various researchers use to proxy for the degree of financial development in countries. Overall, the results do not support the hypothesis that all countries converge to a single equilibrium state in financial development. Nevertheless, strong evidence exists of club convergence. Countries demonstrate a high degree of convergence in the sense that in the majority of financial indexes they form only two or three convergence clubs, depending on the measure of financial development used. We also apply the Phillips and Sul method to two real variables, per capita output and fixed capital investment to GDP, and find strong evidence of five and four distinct convergence clubs, respectively. Finally, we compare the various convergence clubs associated with financial development indicators to those clubs for per capita output and fixed capital investment to GDP. We conclude that strong evidence supports the correspondence between the convergence clubs for financial development and those two real variables.

The effect of dynamic legal tradition on financial development: panel data evidence

This study examines the effect of dynamic legal tradition on financial development. In line with the theory of “dynamic legal tradition” proposed by Beck et al. (Law, politics, and finance. World Bank, Washington, DC, 2001), political variables are employed in the analysis to assess whether these variables could affect the legal environment and hence financial development in countries with different adaptability. The empirical results from the panel data of 60 counties for the period 1980–2006, show that political power could change the legal environment, especially in common law countries, which in turn could affect the development of financial systems. The result demonstrates that political factors that promote shareholder rights greatly influence the development of financial system followed by political factors that promote investor protection.

Convergence Patterns in Financial Development: Evidence from Club Convergence

This paper analyzes the degree of convergence of financial development for a panel of 50 countries. We apply the methodology of Phillips and Sul (2007) to various financial development indicators to assess the existence of convergence clubs. We consider nine such indicators that various researchers use to proxy for the degree of financial development in countries. Overall, the results do not support the hypothesis that all countries converge to a single equilibrium state in financial development. Nevertheless, strong evidence exists of club convergence. Countries demonstrate a high degree of convergence in the sense that they form only two or three converging clubs, depending on the measure of financial development used. We then apply the Phillip-Sul method to per capita output and also find strong evidence of seven distinct convergence clubs in per capita output. Finally, we compare the various convergence clubs associated with financial development indicators to those clubs for per capita output. We conclude that strong evidence supports the correspondence between the convergence clubs for financial development and those for per capita output.

Financial factors and the margins of trade: Evidence from cross-country firm-level data

Using a large cross-country, firm-level database containing 5000 firms in 9 developing and emerging economies, we study how financial factors affect both firms' export decisions and the amount exported by firms. First, our results highlight the importance of the impact of firms' access to finance on their entry decision into the export market. However, better financial health neither increases the probability of remaining an exporter once the firm has entered, nor the size of exports. Second, we find that financial constraints create a disconnection between firms' productivity and their export status: productivity is only a significant determinant of the export decision if the firm has a sufficient access to external finance. Finally, an increase in a country's financial development dampens this disconnection, thus acting both on the number of exporters and on the exporters' selection process. These results contribute to the literature documenting the role of fixed costs and of the extensive margin of trade in total trade adjustment, and provide micro-level evidence of the positive impact of financial development on trade found by previous literature.

The theoretical link between Capital Account liberalization and Currency Crisis Episodes

The paper investigates theoretical background if countries with unregulated capital flows are more vulnerable to currency crises. In order to solve this question properly the paper considers sequence, precondition of the Capital Account Liberalization process and different generation of currency crisis models. Furthermore, theoretical studies pointed that the speed and sequence of the CAL process needs to be adequate for the country financial development and financial liberalization.

Foreign direct investment, financial markets, and political corruption

PurposeThe purpose of this paper is to investigate whether foreign direct investment (FDI) can stimulate financial development in countries with corrupt dominant élites. Financial markets have not been expanded in many developing countries despite their proven positive effect on economic growth. Although three voluminous and parallel lines of research investigate the impact of financial markets, FDI, and political corruption on economic growth, no research up to now has examined the combined effect of foreign investment and corruption on financial development.Design/methodology/approachTo investigate the causal links, a multivariate Error Correction Model (ECM) is applied on a sample of 22 developing countries, over the period of 1976‐2003.FindingsOverall, the study provides some preliminary evidence that FDI may jump‐start financial development in developing countries. Furthermore, the results indicate that most of the causal links are found in developing countries which experience a higher level of corruption in the form of excessive patronage, nepotism, job reservations, “favor‐for‐favors”, secret party funding, and suspiciously close ties between politics and business.Research limitations/implicationsThe study, however, does not provide any evidence that FDI can reduce political corruption. Much additional theoretical and empirical research is needed to explore whether FDI can influence political and economic traditions and stimulate financial markets.Originality/valueThe study is the first empirical attempt to examine the causal link between FDI and financial markets in interaction with political corruption.

Comparative Advantage, Demand for External Finance, and Financial Development

The differences in the levels of financial development between industrial and developing countries are large and persistent. Theoretical and empirical literature has argued that these differences are the source of comparative advantage and could therefore shape tradepatterns. This paper points out the reverse link: financial development is influenced by comparative advantage. The authors illustrate this idea using a model in which a country's financial development is an equilibrium outcome of the economy's productive structure: financial systems are more developed in countries with large financially intensive sectors. After trade opening demand for external finance, and therefore financial development, are higher in a country that specializes in financially intensive goods. By contrast, financial development is lower in countries that primarily export goods which do not rely on external finance. The authors demonstrate this effect empirically using data on financial development and export patterns in a panel of 96 countries over the period 1970-99. Using trade data, they construct a summary measure of a country's external finance need of exports and relate it to the level of financial development. In order to overcome the simultaneity problem, they adopt a strategy in the spirit of Frankel and Romer (1999). The authors exploit sector-level bilateral trade data to construct, for each country and time period, a predicted value of external finance need of exports based on the estimated effect of geography variables on trade volumes across sectors. Their results indicate that financial development is an equilibrium outcome that depends strongly on a country's trade pattern.

La investigación en el ejercicio profesional de la medicina especializada

AbstractResearch has a very important role in the financial development of countries; it improves our life quality in all aspects and helps to face unexpected happenings. In Spain science has been left to a second plane and we feel necessary to reverse this situation. Amongst the different kinds of research (basic, clinical and translational) the two last ones are most interesting for clinical doctors. Training of the doctor in the research field helps to a better practice as the advances in research can be applied to clinical practice. There is a tendency for doctors to be involved less in research and it is very important to modify this situation. Research should start in Medical school and play an important role throughout the training period. Once training has concluded, those with capacity and interest in research should follow a 3-4 years training in the field and after that period they can undertake both clinical and research roles. Finally, in Spain our speciality needs to create specific research laboratories in those ENT departments in hospitals with adequate infrastructure to develop research

Does one size fit all?: a reexamination of the finance and growth relationship

Recent research has found a strong positive effect of a country's financial development on economic growth. We propose that this relationship may vary according to the level of financial development (divided in three regions). In the low region (countries with very low levels of financial development), additional improvements in financial markets have an uncertain effect on growth. In the intermediate region, financial development has a large, positive effect on growth. Finally, in the high region, the effect is positive, but smaller. We examine a panel of 74 countries using generalized method of moments (GMM) dynamic panel techniques and find support for the different regions.

Does one size fit all?: a reexamination of the finance and growth relationship

Recent research has found a strong positive effect of a country's financial development on economic growth. We propose that this relationship may vary according to the level of financial development (divided in three regions). In the low region (countries with very low levels of financial development), additional improvements in financial markets have an uncertain effect on growth. In the intermediate region, financial development has a large, positive effect on growth. Finally, in the high region, the effect is positive, but smaller. We examine a panel of 74 countries using generalized method of moments (GMM) dynamic panel techniques and find support for the different regions.