Financial Development Growth Research Articles

Does financial development and economic growth matter for services export? Cross-country evidence from OECD countries

The unprecedented growth in the export of services and its accompanying economic incentives has invited discussions on service export determinants. Against this background, the present article is an attempt to test whether the contemporary theories on causal links between exports, financial development and growth hold for services export. For realizing the objective, we employed the panel cointegration technique for Organization for Economic Co-operation and Development (OECD) countries over a period of 23 years (2000–22). Findings of both first and second generation cointegration test indicate a long run equilibrium between services export, financial development and growth. However, there are differences in the short and long association, as outcomes of panel auto autoregressive distributed lag (ARDL) approach show financial development to be significant determinant of services export only over long run. Additionally, granger causality test suggests a feedback mechanism prevalent between services export-financial development, services export-growth and financial development-growth. The empirical evidence offered in the study elucidates the significance of continuously developing the financial markets and institutions for achieving sustained growth in export of services. The bi-directional relationship between the variables also presents an opportunity to strengthen economic growth and financial development process through policies aimed at expanding services export.

Remittances, Financial Depth and Economic Growth of Malaysia

The objective of this study is to investigate the effects of remittances inflows to Malaysia's economy and does the financial sector development level have influence on remittances impact to economic growth of Malaysia. Time series technique has been adopted to explore long run effect of remittances, financial depth and growth in Malaysia using annual data for the period 1984-2013. The results showed that remittances and financial depth have positive and significant effect on growth in long run. Granger Causality tests are also used to explore the relationship between remittance-growth and financial development-growth. The findings revealed that there is an impact of remittances on economic growth of Malaysia via the influence of the country's financial depth.

Impact of ICT diffusion and financial development on economic growth in developing countries

PurposeThe present study aimed to examine the relationship between information and communication technologies (ICT) diffusion, financial development and economic growth in the panel of developing countries for 2005–2019.Design/methodology/approachThe study employed the principal component analysis (PCA) to extract the index of ICT diffusion. First-generation panel unit root tests such as Levine Lin Chu (LLC), Im Pesaran Shin (IPS), Augmented Dickey-Fuller (ADF) and Phillips and Perron (PP) were employed to check the stationarity of the variables. Pedroni and Kao co-integration techniques were used to examine the existence of the long-run relationship, and co-integration coefficients were estimated using FMOLS and dynamic ordinary least squares (DOLS). The panel Granger causality approach examined the short-run and long-run causality.FindingsThe results confirmed that ICT diffusion, financial development and trade openness accelerate growth, whereas inflation dampens economic growth. Further, the causality test showed bidirectional causality between ICT growth and financial development growth but a unidirectional causality from financial development to ICT diffusion in developing countries.Originality/valueThe study recommends synchronizing public and private sector investment for a synergistic effect on ICT infrastructure and adequate investment in the financial sector to increase the growth rate in developing countries. Economic policies should be adopted toward incentives and subsidies to ensure affordable ICT services for disadvantaged communities. Also, training programs focussing on enhancing digital literacy to enable all segments of the population to use digital platforms for financial services are recommended.

The Asymmetric Influence of Exchange Rate and Inflation on Financial Development in Nigeria: Evidence from NARDL

This paper examined the asymmetric effects of exchange rate, and inflation on financial development growth using a model enhanced with oil prices asymmetry to apprise model specification. The research question that has been used implies, do the changes in their asymmetry significantly influence financial development? We employed nonlinear auto-regressive distributive lag (NARDL). In addition, we used the monthly data from 1980M01 to 2018M12. We found a long-term negative shock in exchange rate, both short run positive shock and negative shocks, respectively, declining the financial development. Additionally, the long run negative oil price shock and its long-term positive shocks stimulate and decline financial development, respectively. Regarding inflation, its positive and negative shocks in long run, respectively, reduce financial development. While in the short run the negative and positive shock in inflation increase and decline the financial development respectively. Accordingly, the results demonstrate a stable and sustainable inflation and exchange rate environment that would negatively cause financial development to stabilize the oil price and enhance the robust financial system. Therefore, successful policies that promote low inflation and exchange rates, overhaul of reliably improved financial institutions, capital accumulation, and efficient resources mobilization should be put in place for positive financial development to occur.