Financial Development Economic Growth Research Articles

Financial Development and Real Gross Domestic Product in Rwanda

Real gross domestic product as a macro-economic indicator measures the value of economic output after adjustment for price changes. In this regard, due to the role played by financial development in economic growth, financial intermediation has been regarded as an important factor in boosting gross domestic product in the both developed economies and developing economies. The study investigated the effect of financial development on Real Gross Domestic Product in Rwanda. The study adopted e<i>x post facto </i>design. Time series data were collected from 2011-2022 and Ordinary Least Squares (OLS) was deployed. Findings revealed that financial liberalization, domestic credit to private sector, monetary policy rate, market capitalization and all share index jointly and significantly influenced real gross domestic product (<i>Adj. R<sup>2</sup> =</i> 78.65%<i>, p = </i>0.009028 < 0.05, F-stat = 9.108778) in Rwanda. The study concluded that financial development enhanced real gross domestic product in Rwanda. It was recommended that the government of Rwanda should improve on real gross domestic product by improving financial development through more liberalization of the financial sector, expansion of domestic credit to the private sector, market capitalization, all share index and use of monetary policy rate as effective channel of monetary transmission mechanism in the economy.

The Role of Financial Development in Economic Growth using WPM Method

Financial development is possible investments creating information about and allocation of capital, monitoring of companies and corporate administration, commerce, diversification and risk management, accumulation and accumulation of savings, exchange of goods and services in activities like facilitation includes improvements. provided by financial institutions economic theory, at best and efficient financing institutions-banks, stock markets and bond markets-which capital it’s for high production applications paying is for economic growth beneficial. development of developing Asia strong to retain and efficient financial systems particularly important are because the performance of the investment as a driver of the region's development reduces the amount of investment. Since the early 1990s the region's financial systems are deep and diversified data indicate. 125 countries more formal econometrics on panel data quantitative analysis, financial development significant in development positive effect confirms having, especially in developing countries. of financial development in the development of the region impact than elsewhere significantly different thatno, for the asian financial crisis since then its influence has weakened the results also indicate that financial intermediaries, these teachers are bankers finance in the weakness of the sector effect of liberalization Is it a temporary effect will check that, that is, in the following years only this is observed. beginning of liberalization. this is not the case. of the banking sector weaknesses will only become apparent over time. however, in developing countries financial Liberalization Policy as an important part of the reform has Among some researchers, it is about virtues reflects overall confidence financial liberalization is that of the banking sector lead to weakness significant factor is, also of economics status even after controlling that there is this effect they found, the first one below income in the area earning funds summarize the implications the first one below review the area we do. income, cost and Savings, investment and wealth accumulation financial statements of we briefly reviewed do. The second division financial institutions orrole of intermediaries deals with The third section income, interest and money conventional theories about funding for real development between growth and development for important contacts enough attention that he did not pay some theoretical adaptations proposes and argues. The purpose of this paper is tofield-projectseveral in conjunction with the detain determinations and measurement perceived at a distance water using data for productivity mapping (WPM)methods and protocols is to create. Stock Market Investments, Real Estate Investments, Cryptocurrency Investments, Peer-to-Peer Lending and Startups and Venture Capital. Risk Management, Return on Investment (ROI), Portfolio Diversification and Costs and Fees. the Ranking of Financial development. Real Estate Investments is got the first rank whereas is the Cryptocurrency Investments the Lowest rank.

Exploring the Nexus Between the Shadow Economy, Finance, and Economic Growth in Tunisia

This study aimed to assess the effect of the shadow economy on the finance-growth relationship in Tunisia over the period 1984-2020. The authors used a nonlinear autoregressive distributed lags (NARDL) model to verify the impact of the informal economy as measured by Tanzi's method on the finance-growth relationship. The results suggest that in the long term, with a positive change at the level of the shadow economy, the effect of financial development on growth becomes negative. The opposite is also true. However, in the short run, asymmetric effect of the shadow economy is only detected on economic growth and not on the financial development-economic growth nexus. Indeed, the level of the informal economy has an important role in the Tunisian economy. The significant and positive impact of financial development on the economy is strongly influenced by the size of the informal economy.

Role of Education and Financial Development in Economic Growth of Selected Asian Countries

Education and financial development are key determinants of economic growth. This research makes an effort to highlight the role of education and financial development with urbanization in the economic growth of selected Asian countries. Economic growth is used as a dependent variable, and secondary school enrolment, financial development, life expectancy, and urban population are used as independent variables. Panel data set for the time 2002 to 2019 is used for the analysis. The random effect technique is used. The study results demonstrate that secondary school enrolment, financial development, life expectancy, and urban population increase economic growth in selected Asian countries. It is recommended that government should provide free of cost education facilities in selected economies. Moreover, the public should be provided with more financial debt facilities to increase per capita income, high living standards, and economic growth in these selected economies. The plan must be placed on education and health high on the agenda in these economies.

How Does Financial Development Affect the Growth–Inequality Nexus? Evidence from a PCHVAR Analysis

Abstract While the important role of financial development for economic growth, as well as for its effect on economic inequality, has been widely acknowledged by the literature, far less attention has been put on understanding how growth and inequality may be differently influenced by alternative types of financial development. Against this background, we investigate the impact of different types of financial development on the growth–inequality nexus with a panel of 110 advanced and emerging economies and yearly data ranging from 1980 to 2016. Using the panel conditionally homogeneous vector-autoregressive (PCHVAR) model of Georgiadis (2014); Georgiadis (2012), we find that the overall level of financial development (measured by the International Monetary Fund (IMF)’s financial development index) has a significant impact on the growth–inequality nexus. Specifically, our results reveal that a higher level of overall financial development results in more equitable economic growth. Furthermore, an increase in the income share of the top 10% income earners has a significant negative impact on economic growth for low and high levels of overall financial development but is insignificant for middle levels. By looking at more disaggregated subindices of financial development, we find that economic growth increases the income share of the low 10% income earners when financial institutions and markets are deeper and financial markets are more efficient. Thus, our results call for a more differentiated view on the concept of financial development in order to derive policy measures aimed at different parts of the society.

Revisiting the finance-growth nexus in Hong Kong: fresh insights from nonparametric analysis

PurposeSince financial sector plays a critical economic role in Hong Kong, the current research aims to comprehensively analyze the association between financial development and economic growth in the country to draw correct conclusions about the impact that financial sector's development has on the growth of the economy. This requires both using of more comprehensive data that includes all or nearly all elements of the country's financial sector and utilizing advanced econometrics techniques to provide more reliable evidence based on the findings. In the study, both issues have been addressed more academically to aid the relevant authorities better.Design/methodology/approachThis study empirically examines the financial development-economic growth nexus in Hong Kong employing data covering 1980–2019. The quantile-on-quantile (QQ) approach of Sim and Zhou (2015) is utilized to investigate certain subtle aspects of the association linking financial development and economic growth. In addition, the authors benefit from applying the nonlinear Granger causality test of Diks and Panchenko (2006) to assess the variables' nexus in a nonlinear manner.FindingsIn contrast to the evidence of a unidirectional linkage documented in many related studies, the empirical findings suggest that a bi-directional relationship exists between financial development and economic growth for Hong Kong. This is a helpful input for the relevant policymakers and implies that they can set appropriate policies and regulations to balance financial development and economic growth in this country.Originality/valueThe originality of this study can be divided into two parts. Methodologically, unlike past studies that utilized mostly linear and parametric methods, the paper contributes to the literature by applying the more robust nonparametric and nonlinear methodologies. Theoretically, most researchers have used various financial development indicators, which led to very different conclusions. Therefore, this study attempts to resolve this deficiency in the literature by using a more comprehensive index for financial development.

Realizing the Sustainable Development Goals through technological innovation: juxtaposing the economic and environmental effects of financial development and energy use.

The BRICS comprise of group of emergingmarket economies which are committed to achieving the Sustainable Development Goals agenda of the United Nations by the end of the year 2030. In this regard, it is critically important for these nations to sustain their annual rise in theireconomic growth rates while simultaneously declining the rate of discharge ofcarbon dioxide emissions. Against this backdrop, this study aims to investigate how financial development, greaterprimary energy consumption, and technological innovation affect the prospects of the BRICS nations in achieving economic and environmental sustainability. Considering the period from 1990 to 2020 and utilizing methods that are robust to working with cross-sectionally dependent, heterogeneous, and endogenous panel data, the key analytical findings derived in this study reveal that higher levels offinancial development, primary energy consumption, and technological innovation boost the per capita economic growth rates of the BRICS nations. Besides, technological innovation also moderates the financial development-economic growth and theprimary energy consumption-economic growth nexuses by jointly boosting economic growth rates with these two macroeconomic variables. On the other hand, financial development and higher primary energy consumption are seen to boost the annual per capita carbon dioxide emission growth in these emerging nations, while technological innovation is observed to do the opposite. Furthermore, technological innovation is witnessed to moderate the nexus between energy use and economic growth to further reduce theemission growth ratein the BRICS nations. Accordingly, a set of policies are recommended to the concernedgovernments in order to enable the BRICS nations to attain the Sustainable Development Goalsagenda.

Financial sector development, anti-money laundering regulations and economic growth

PurposeThis study examines the influence of anti-money laundering (AML) regulations on the financial development-economic growth nexus around the world.Design/methodology/approachThe study uses data from 165 countries spanning continents, income levels, and regulatory regimes from 2012 to 2018. The Prais–Winsten (1954) and Hansen (2000) panel threshold estimation approaches were used to assess the study's hypothesized relationships.FindingsFinancial development, according to the research, generally stimulates economic growth. However, the authors find evidence of AML regulations' threshold effect on the finance-growth connection, with the impact of finance on growth being positive below the threshold value. Above the threshold, however, the authors observe a negative influence. Further, the authors find that AML regulations have a considerable detrimental impact on the finance-growth nexus over the threshold for developed countries. However, the authors find a positive but insignificant effect of finance on growth below the AML regulations threshold for African countries, while finance positively impacts growth above the AML regulations threshold.Practical implicationsThe findings of the study imply that countries must make conscious efforts to combat the incidence of money laundering by establishing policies to improve financial transparency and standards, promoting public sector transparency and accountability, reducing legal and political risk, and combating bribery and corruption.Originality/valueThis study contributes to the literature as it is the first attempt to examine the moderating role of AML regulations in the finance-growth nexus. Also, the study examines the threshold effect of how AML regulations impact the finance-growth nexus.

The role of inflation in financial development–economic growth link in sub-Saharan Africa

The role of inflation in financial development–economic growth link in sub-Saharan Africa

Exploring renewable energy, financial development, environmental quality, and economic growth nexus: new evidence from composite indices for environmental quality and financial development.

The association between trade, financial development, consumption of renewable energy, environmental quality, foreign direct investment, and economic growth is important for sustainable growth and environmental strategies. Hence, this research unveils this association in selected low- and high-income economies from 1996 to 2020. Unlike most of the previous literature, this study uses a composite environmental quality index, a composite financial development index, and a composite trade share measure to better represent environmental quality, financial development, and trade openness, respectively. The Continuously Updated Fully Modified and Continuously Updated Bias Corrected estimators along with the Dumitrescu Hurlin causality method are utilized to scrutinize the nature of the linkage between the modeled variables. The long-run estimation provided that consumption of renewable energy and environmental quality augment economic growth in high-income nations, while both these variables do not contribute to the economic growth in low-income countries. Financial development upsurges economic growth in high- as well as low-income nations. Interestingly, trade openness boosts economic growth in high-income countries, while in low-income countries, it obstructs economic growth. In causal linkage, the conservation hypothesis for low-income countries and the feedback hypothesis for high-income countries are confirmed in the context of consumption of renewable energy and economic growth association. The supply-leading hypothesis for low-income countries and the feedback hypothesis for high-income countries are supported regarding the financial development-economic growth nexus. Moreover, one-way causality from growth to environmental quality and bidirectional causality between environmental quality and economic growth for low- and high-income countries are established, respectively. Lastly, exhaustive environmental and economic policies are directed.

A STUDY OF FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH: AN EMPIRICAL EVIDENCE FROM AN INDIAN ECONOMY

Purpose: Using yearly information from 1982 to 2020, the paper‘s goal is to investigate the link between economic growth & financial development in India. Design/methodology/approach: ADF, KPSS, Ng– Perron, and DF-GLS unit root tests are used to verify stationarity characteristics. The autoregressive distributed lag (ARDL) technique to co-integration is used to investigate short and long-run dynamics. Findings: The co-integration test reveals a long-term link between India's economic growth and financial development. According to the findings of the ARDL tests, both market and bank-based indices of financial development have a significantly and positives influence on India's economic growth. As a result, the findings back up the supply-side hypothesis and emphasize the significance of financial development in economic growth. The results also suggest that the Indian financial sector, which is dominated by banks, has the ability to develop the economy through credit transmission. Originality/value: To achieve long-term economic growth, the current study suggests suitable financial market changes. Policymakers that aim to maintain a simultaneous expansion of growth and financial development may find the findings valuable.

The role of Foreign direct investment and financial development in economic growth: Evidence from global income countries

The role of Foreign direct investment and financial development in economic growth: Evidence from global income countries

Does financial development spur tourism growth? A dynamic time series analysis for the case of an SIDS

ABSTRACT This paper examines the interactions between financial development and tourism growth for the case of Mauritius, a heavily tourism-dependent small island economy and one of the Africa’s best economic performers. Using dynamic regressions analysis over the period 1980–2018, namely, a Vector Error Correction Model which also accounts for endogeneity issues in tourism modelling, the results confirm that financial development is associated with tourism growth in the long run. The findings also show that economic growth, income of tourists as well as the availability of hotel rooms are important determinants of tourism. Moreover, it is observed that tourism development also leads to financial development thus confirming a bi-directional causality between these two variables. The bi-directional causality was also confirmed for the financial development–economic growth nexus as well as the tourism-growth nexus. Finally, evidence of the mediating role of economic development in the financial development–tourism development link is reported.

Examining the Financial Development–Economic Growth Nexus from an Institutional Approach: Evidence from Non-Oil Arab Countries

This paper highlights how institution quality plays an important role in the financial development and economic growth nexus in six developing Arab countries. Several estimations were calculated using the generalized method of moments (GMM) covering the period from 1990 to 2016. The results for the selected countries show that the institutions’ quality is responsible for diffusion between financial and real spheres. Thus, the financial system needs good institutional quality presented by better socio-economic conditions, corruption control and a well-respected legal framework to accelerate economic growth.

Threshold effects of inflation on the financial development-economic growth nexus in Tunisia

The main purpose of this paper was to ascertain the effect of inflation on the growth-enhancing role of financial development assuming a non-linearity relationship between finance and growth under ...

Threshold effects of inflation on the financial development-economic growth nexus in Tunisia

The main purpose of this paper was to ascertain the effect of inflation on the growth-enhancing role of financial development assuming a non-linearity relationship between finance and growth under different inflation regimes. The empirical study was carried out using the threshold regression model over the period of the first month of 1982 to the twelfth month of 2018. We found a strong evidence of a threshold effect (4.89%) which modifies the impact of financial deepening on growth in Tunisia. If the inflation rate falls below 4.89%, financial depth stimulates economic growth. However, this effect is weakened as inflation rate grows. Oppositely, credit growth of commercial banks is not efficient enough to contribute to economic growth. Thus, high inflation disrupts the growth-enhancing role of finance in Tunisia. Practically, the Tunisian monetary authorities are recommended to keep an inflation rate under 4.89% to reach a sustainable growth through financial development.

The Role of Financial Development in Economic Growth of Nepal: ARDL Approach of Cointegration with Structural Break Analysis

This paper, using the most recent index of financial development as developed in Svirydzenka (2016), examines the role of financial development in the economic growth of Nepal. This paper employs the Autoregressive distributed lag (ARDL) approach of cointegration with the structural break in time series data for the period of 1980-2017. Nepal is a unique country with a population of about 30 million with high demographic dividend and big markets in the neighbours, the earlier entrant in the liberalization and reform in the region, endowed with lots of natural resources and beauties, and comparatively cheaper labor force in the region but it remains as one of the poor landlocked developing countries sandwiched between two emerging economies, namely China and India. The results show that financial development has a strong long-run positive relationship with economic growth. Therefore, developing the strategies for the proper financial development improving the financial institution quality and widening the financial market to improve capital formation would be a way to accelerate the economic growth in Nepal.

Does financial development still a spur to economic growth in India?

The present study examines the dynamic linkage between financial development and economic growth by taking saving as an intermediary variable in the case of India using annual data from 1970 to 2018. The result indicates the existence of long‐run cointegrating relationship between financial development economic growth. Result from the long run granger causality test reveals unidirectional causal flow from economic growth, savings (both total and private savings) and financial development. On the other hand, financial development also causes economic growth but not through savings. The short‐run causality test results show that economic growth granger causes financial development, but there is no causal flow from financial development to economic growth. Economic growth Granger causes savings (both domestic and private savings) but the savings does not cause economic growth. Bidirectional causalities run from financial development to savings and vice versa. The study concludes that savings can be taken as an important intermediary to run tri‐variate financial‐growth nexus.

Does Financial Sector Promote Economic Growth in Pakistan? Empirical Evidences From Markov Switching Model

This study investigates the financial development–economic growth relationship in Pakistan over the period 1975–2017 using the Markov Switching methodology. The financial development index has been constructed using the principal component analysis. Unexpectedly, the empirical result shows that financial development contributing negatively to economic growth in the high and the low economic growth regimes in Pakistan. Moreover, the results indicate that labor force retards economic growth with a higher magnitude. A significant positive effect of gross fixed capital formation on economic growth is also observed. The results reveal that policymakers may revisit the financial development policies so that the financial sector may contribute positively to economic growth process in Pakistan. In this respect, more steps are needed to further liberalize the financial sector to enhance economic growth in Pakistan.

Role of financial development in economic growth in the light of asymmetric effects and financial efficiency

AbstractThe growth effects of financial development might be asymmetric and nonlinear according to the level of financialization of countries. As a corollary to this notion, in the subject study, we developed a three‐regime threshold autoregressive distributed lags (TARDL) model, which allows us to accommodate the asymmetric effect of financial development on economic growth in top 10 financially developed countries. We augmented the TARDL model by including trade openness, capital formation and labour as potential determinants of economic growth. The empirical findings revealed the existence of threshold asymmetric co‐integration between variables. In particular, in the upper regime, financial development boosts economic growth in Singapore while it exerts a negative impact on economic growth in Finland. In the middle regime, financial development increases economic growth in Australia and Singapore. However, in the lower regime, financial development hampers economic growth in the US, Malaysia and Singapore. Trade openness has a positive long‐run influence on economic growth in Canada, South Africa, Australia, Malaysia, New Zealand, Singapore, Finland and Norway. Capital formation strengthens economic growth in the US and Malaysia in the long‐run. Labour is found to sustain economic growth in the long‐run for Malaysia and Singapore. The dynamic multipliers which depict the response path of economic growth to a one‐unit shock of financial development in the three regimes highlight the discrepancies in the reaction of economic growth to financial development shocks occurring in different regimes. Important policy implications can be instigated from the empirical results.