Financial Development Variables Research Articles

The Effects of IT and Financial Development on Economic Growth in BRICS-T Countries: Insights from the Solow Growth Model

The aim of the study is to examine the impact of IT and financial development on economic growth in BRICS-T countries for the period 1990-2022 using the panel quantile technique. For this purpose, IT technology and financial development variables were added to the basic Solow model. According to the findings, the impact of physical capital stock on economic growth is positive in all quantiles. The effect of population growth on economic growth is significant starting from 0.4 quantile and the negative effect increases as the quantile level increases. Information technology, which is the subject of the study, positively affects economic growth and this effect decreases as the quantile level increases. The variables we used to represent the level of financial development, financial institutions have a positive but statistically insignificant coefficient sign, while financial markets have a statistically significant but negative coefficient sign. This negative effect increases as the quantile level increases.

Does Tourism Opportunity or Threat to Green Economıc Growth Evidence From The Top 10 Countries

The aim of the study is to examine the impact of tourism on green economic growth in the top 10 countries in international tourism (USA, Austria, Canada, France, Germany, Spain, UK, Italy, Greece, Mexico) using panel data analysis method for the period 2010-2022. In the study, control variables (energy and financial development variables) were used in addition to the tourism variable. This context, four models have been created. According to the findings, an increase in international tourism numbers reduces green growth. The variables of renewable energy and financial institutions are statistically insignificant; but the variables of fossil energy and financial markets have significant effects on green economic growth, with fossil energy having a negative impact and financial markets having a positive impact. It is expected that this study will contribute to the literature by being one of the first studies to examine the impact of work tourism on green economic growth.

The role of smart cities in sustainable development: empirical evidence from Türkiye

PurposeThis study aims to empirically examine the effects of smart cities on sustainable development for the period 1990–2019 for Türkiye.Design/methodology/approachThe relationship between smart cities and sustainable development was analyzed with the help of the ARDL Bounds Test. In addition, the consistency of the model was tested with the FMOLS estimator. The indicators of the smart city were selected following the literature to represent smart cities, and the author created the smart city index. The study used other variables thought to impact sustainable development as secondary data.FindingsThe results show that smart cities positively and significantly impact sustainable development in Turkiye in both models during the sampling period. In addition, while real GDP, population density, and financial development variables positively affect sustainable development, population density has a negative effect on sustainable development, according to the results obtained from FMOLS estimators.Originality/valueThe first novelty of this study is the creation of the smart city index. The second novelty is that there are almost no studies on the effects of smart cities on sustainable development, especially for Türkiye.

How do energy security risk and ICT affect green investment?

Green investment yields financial returns while positively influencing the environment. Several empirics have tried to find the factors that impact green investment, but none of them has focused on energy security risks and ICT as potential determinants of green investment. This analysis intends to scrutinize the influence of energy security risk and ICT on green investment from 1996 to 2021 with the help of a novel CS-ARDL model. The findings confirm the positive association between energy security risks and long-term green investment globally and in Asia, America, Europe, and Africa. Similarly, ICT boosts green investment in the long term globally and in America and Europe. Carbon emissions also escalates green investment globally and in Asia, America, Europe, and Africa. However, GDP boosts green investment globally and in Asia, America, and Europe, while FD boosts green investment globally and in America and Europe. Lastly, trade openness also increases green investment in Asia and America in the long run. The short-term impacts are mostly insignificant except for the GDP, CO2, and financial development variables, which boost green investment in one or two regions. Thus, governments should strategize to encourage ICT for sustainable green investments.

Does Uncertainty in Climate Policy Affect Economic growth? Empirical Evidence from the U.S.

This study aims to empirically investigate the short- and long-term effects of climate policy uncertainty on economic growth in the U.S. for the years 1990-2020. In the study, total workforce, foreign direct investments, and financial development variables were also selected as control variables, and the effects of these variables on economic growth were examined. The study used the ARDL bounds test approach to investigate the cointegration between the variables. The findings confirm the existence of a positive and statistically significant relationship between climate policy uncertainty and economic growth in the sample period in the U.S. In addition, the effects of total labor force, foreign direct investments, and financial development on economic growth were found to be positive and statistically significant in the study.

Energy efficiency, technological innovation, and financial development-based EKC premise: Fresh asymmetric insights from developing Asian regions

This study analyses the impact of energy efficiency, technological innovation, and financial development on carbon dioxide emissions in developing Asian regions. It considers both positive and negative effects and incorporates the concept of the environmental kuznets curve (EKC). Utilizing data from fifteen developing Asian economies from 1995 to 2021, the study employs a dynamic panel data approach to examine the relationship between the variables. More specifically, the study utilizes econometric techniques, such as the error correction model (ECM), to consider both short-term and long-term dynamics and estimate the size and direction of the effects. In addition, the study incorporates squared-term financial development variables to measure the non-linear effects and examine the existence of an inverted U-shaped EKC pattern. The findings indicate that when financial development experiences positive shocks, it tends to align with the U-shaped premise of the EKC. On the other hand, when financial development experiences negative shocks, it tends to result in environment-friendly outcomes. In addition, the study analyses the varying effects of fossil fuels and renewable energy sources during periods of both positive and negative shocks. Technological innovation is also assessed for its impact on environmental sustainability. In general, the approach integrates econometric modeling and theoretical frameworks to offer insights into the intricate relationship between energy efficiency, financial development, technological innovation, and CO2 emissions in developing Asian economies.

The Relationship Between Financial Development and the Composite Stock Price Index in Emerging Market Countries: A Panel Data Evidence

This study examines the influence of financial development variables on the Composite Stock Price Index (CSPI) in Emerging Market Countries. This study uses secondary data obtained from the International Monetary Fund and Yahoo Finance, with an annual data period of 2000–2020. Panel data regression analysis using the random effects model was performed to analyze data. The results showed that Financial Market Access Index (FMAI) and Financial Market Depth Index (FMDI) variables had a positive and significant relationship affecting CSPI, while Financial Market Efficiency Index (FMEI) had a negative and significant relationship to CSPI. The FMEI results negatively affecting CSPI indicate the need for improvements in financial market efficiency. Increased efficiency can help ensure that relevant and accurate information is available quickly and fairly to all parties, driving better investment decisions.

Finding Causality Between Finance and Growth in Bangladesh

The relationship between financial development and economic growth has gained much attention in the last three decades. It has been primarily believed that financial sector development promotes economic growth. A lot of theoretical and empirical research has been done in this field and the results which came out are a kind of mixed relationship between the two. Bangladesh, a country in the SAARC region has taken different financial reform policies in the same line with other developed and developing countries. The main purpose of this paper is to investigate the relationship between financial development and economic growth in Bangladesh. Annual time series data for the period 1976 to 2020 has been taken and the ARDL technique has been used for this purpose. The ARDL bound testing shows that there is a long-run relationship between financial development variables and economic growth. In the short run, all the proxies of financial development were found to have a significant relation to economic growth. The study has found two bidirectional causality and one unidirectional causality between the variables.

Investigating the Relationship between Financial Development and Tourism Management: Evidence from Asian Economies

The purpose of this research is to examine the link between financial development and tourism. The study looks at the relationship between financial development variables including Domestic credit by private sector bank and Broad Money and tourism measures like tourist receipts. The analysis is based on data from an Asian country ranging from 1995 to 2020 and using correlation analysis, co integration first generation (Kao) and Linear regression to investigate the relationship between the variables. Whereas the cross-section dependence and ordinary least square test also used to generate the results. The findings indicate a positive relationship between financial development and tourism, implying that nations with more developed financial systems have greater levels of tourism activity. More study is needed, however, to establish the causal link and understand the underlying processes behind this correlation.

Domestic Borrowing and the Nigerian Economy: A Bayesian VAR Analysis

ABSTRACT: The Nigerian government has borrowed for more than three decades to fund the growing fiscal deficit based on a weak tax revenue base. After the repayment of the country's foreign loans in 2006, the borrowing structure has been dominated by domestic loans. Between 2006 and 2020, domestic borrowing has grown by more than 800 per cent. This study examines the effect of domestic borrowing on Nigeria's macroeconomic variables from 1975 to 1980. The variables examined against the effect of domestic borrowing include economic growth, financial development (broad money supply and credit to private sector), external borrowing, interest rate, inflation, industrial production, private investment, trade openness and population growth rate. The study utilised the Bayesian Vector Autoregressive (BVAR) model. The BVAR approach gives more realistic estimations than other VAR models as it considers prior information steady states during analysis. The study also adopts the Cholesky impulse response function and variance decomposition approach in the investigation. The study found a long-run equilibrium relationship between domestic borrowing and other macroeconomic variables. Also, domestic borrowing positively and significantly affected economic growth, industrial production and inflation. However, domestic borrowing negatively and significantly affects trade openness. Although the effect of domestic borrowing on the financial development variables (broad money supply and credit to the private sector) is negative, it is insignificant. The Bayesian VAR impulse response simulation demonstrates that the fiscal policy shock from domestic borrowing impacts the macroeconomic variables in line with the estimated regression results. As a follow-up, the variance decomposition results show that the decomposition of the shocks from government domestic borrowing is borne more by external borrowing, broad money supply and interest rate in the order of magnitude. The study recommends a restriction in monetary policy to benchmark and closely checkmate the aggressive spending from domestic borrowing. Also, the Nigerian government should improve investment in infrastructure to enhance private sector productivity and expand taxes revenue base to mitigate the reliance on borrowing as a source of funding for fiscal deficit. Furthermore, the country's productivity must be coordinated by the government to expand the sources of foreign exchange earnings to enhance stability in the country's external sector.

The Study of Economic Growth of Belize

The objective of this research is to conduct an empirical analysis of the relationship between Economic Growth and Domestic Commercial Lending in Belize. This research is guided along the supply leading and demand following paradigms. Economic growth in this study is measured by annual Gross Domestic Product (GDP) which is employed as the dependent variable. The financial development variables applied are: Commercial Credit to Belize’s Primary, Secondary and Tertiary Sectors, Domestic Commercial Credit to the Private and Public Sectors and Interest Rates (lending). These are employed as the independent variables. The results of this research found that (i) Commercial lending in general has a positive effect on overall economic growth, particularly in the secondary and tertiary sectors (ii) Domestic Commercial Credit to the Private Sector has a positive relation on economic growth (iii) Domestic Credit to the Public Sector does not positively affect economic growth (iv) Increase in Lending Rates has not deterred consumer borrowing and furthermore, economic growth. This research is trying to understand possible factors promoting sustainable Economic Growth of Belize.

Does Islamic Financial Development Reduce Carbon Emissions? Evidence from OIC Countries

Islamic finance has great potential in encouraging the development of social and economic infrastructure. The rapid improvement of the Islamic finance sector and the increasingly good economic growth have a positive impact on infrastructure development in the Countries of the Organization Islamic Cooperation (OIC). The study analyzed the impact of the development of the Islamic financial sector on CO2 emissions in 12 OIC countries including the United Arab Emirates, Indonesia, Jordan, Kazakhstan, Kuwait, Lebanon, Malaysia, Nigeria, Pakistan, Saudi Arabia, Sudan and Turkey from 2013 to 2018. The dependent variables used are CO2 emissions, while independent variables include GDP per capita, Sukuk issuance, total sharia-compliant, total energy consumption, and industry value-added. The study used the Panel Corrected Standard Error (PCSE) method and robustness using the Newey-West standard error model. Results from the study showed that GDP per capita and industry value added significantly increased CO2 emissions. Conversely, Islamic financial development variables namely Sukuk issuance and total sharia-compliant have a negative and significant impact on CO2 emissions. This research suggests for policymakers to further encourage sustainable development of Islamic finance to encourage energy efficiency and renewable energy production and consumption to reduce CO2 emissions and maintain environmental quality.

Financial Development and Economic Performance in Nigeria: Evidence from Sectoral Analysis

This paper examined the effect of financial development variables on sectoral output performance in Nigeria. The study adopted time series data that were obtained from the Statistical Bulletin of the Central Bank of Nigeria (CBN, 2020) and World Development Indicators (WDIs, 2020) for a period of 1981 – 2020. Autoregressive distributed lag (ARDL) and Fully Modified Ordinary Least Squares (FMOLS) techniques were adopted for short run and long run analyses. The results show that domestic credit to the private sector as a ratio of GDP has positive effect on Agricultural sector, but records negative effects on manufacturing sector, whereas, money supply as a ratio of GDP exerts negative effects on all the sectors in the short run. In the long run, money supply as a ratio of GDP also exerts negative effects on all the sectors save for services sector on which it has positive effects, while domestic credit as a ratio of GDP has positive long effects on all the sectors. The study identifies agricultural and services sectors as growth catalyzing sectors in relation to the influence of financial development. It is therefore recommended that policy makers take serious interest in the sectors, while further examining the challenges of failing financial development strategies on the manufacturing sector

ESG and financial performance of banks in the MENAT region: concavity–convexity patterns

ABSTRACT This study aims to investigate the impact of Environmental, Social and Governance (ESG) on bank performance (FP) in the Middle East, North Africa and Turkey (MENAT) region. The sample consists of 46 listed banks between 2007–2019. FP is measured through accounting (Return on Assets Return on Equity) and market indicators (Tobin’s Q Stock Return ). We test the effect of ESG and its quadratic term on FP by controlling for bank-specific, macroeconomic and financial development variables. Our results support the presence of a non-linear ESG–FP relationship. ESG incremental investments remain beneficial till reaching an inflection point. Interestingly, the financial development variables are significant, while ESG pillars follow different patterns. Governance pillar has a concave relationship with accounting performance while environmental pillar has a convex relationship with the market return. The ESG–FP relationship depends on three vectors: pillars; measure of FP; and level of ESG. Banks should determine ESG turning points to rationalize their investments and contemplate efficient returns.

The impact of financial development on energy consumption in Nigeria

AbstractThis research evaluates the impact of financial development on energy consumption in Nigeria within the study period 1960–2019. Energy consumption in this study consists of fossil fuel energy consumption (FFEC) and renewable energy consumption (REEC). The ARDL bounds testing approach is used to determine whether a long‐run relationship exists among the variables. The findings showed evidence of a short‐run relationship. However, there was no long‐run relationship. In terms of FFEC, the study outcomes showed that financial development has a significant and negative impact on FFEC when domestic credit provided by the financial sector (DCPF) variable is used. However, the impact is not significant when the market capitalisation of listed domestic companies (MCAP) variable is used. Based on the Wald test, financial development variables at different lags jointly influence FFEC. For REEC, the results show that financial development significantly and positively impacts REEC at the 10% level of significance when the DCPF variable is used. However, it is insignificant when the MCAP variable is used. Using the Wald test, financial development variables at different lags jointly influence REEC. On the other hand, GDP is found to have a negative relationship with FFEC, but a positive relationship with REEC.

FINANCIAL DEVELOPMENT AND HOUSING PRICE CHANGES UNDER THE CONDITION OF FINANCIAL CONTROL: EVIDENCE FROM CHINA

The impact of financial development on the real estate industry has increased with the degree of financial control. This research presented in this paper divides China’s area into strong and weak regions based on the degree of financial control, and then it studies the relationship between housing price changes and the level of financial development using panel data from the period 1994 to 2018. We find that the level of national sample financial development plays an important role in promoting the housing prices. In areas with strong financial control, financial resources tend to be allocated to the real estate industry, boosting real estate prices. In areas with weak financial control, the role of financial development in promoting real estate prices is not obvious. The funds accumulated by financial institutions are more marketable and independent. We have confirmed these findings by our analysis of the transformation of certain financial control and financial development variables, the application of Panel-VAR estimation methods, and other robustness tests.

Financial development and economic growth in Tanzania: an ARDL and bound testing approach

Purpose The purpose of this study is to empirically weigh the evidence for financial depth, liquidity and efficiency role to economic growth, and test for the existence of cointegration between financial development variables and economic growth in Tanzania. Design/methodology/approach The study used the autoregressive distributed lag model with bound testing procedures. The sample covered yearly time-series data from 1980 to 2017, i.e. 38 years. Findings The results suggest that financial system depth is positively related to economic growth in the short run and that financial system liquidity and efficiency is strongly negatively associated with economic growth both in the short and long run. Further, it is found that financial development is cointegrated with economic growth. Thus, financial reforms and liberalisation have not fully brought the desired positive effects on economic growth yet. Originality/value The study uses principal component analysis to capture specific dimensions within the financial system as an intuitive way to aggregate financial development effects. Unlike studies that included several countries with heterogeneous characteristics, which are sometimes difficulty to homogenise, in recognition of countries’ unique experiences, this study uses data from Tanzania as a specific case. It documents pertinent pieces of evidence for a developing economy necessary for financial policy adjustments post the financial and economic liberalisation and reforms period. It nevertheless sheds light on financial policies for other comparable developing economies during and after both financial and economic liberalisation settings.

The Nexus between Carbon Emissions, Energy Use, Economic Growth and Financial Development: Evidence from Central and Eastern European Countries

The aim and novelty of this study consist of estimating the nexus between CO2 (carbon dioxide) emissions, energy use, economic growth, and financial development for ten Central and Eastern European countries (CEEC) over the 2000–2017 period, starting from Environmental Kuznets Curve (EKC) theory. The Fully Modified Ordinary Least Squares (FMOLS) method was used for testing the cointegration relationship. Granger causality estimation based on the Vector Error Correction Model (VECM) and Pairwise Granger causality test were applied to identify the causality relationships between the variables and to identify the direction of causality. The implementation of the tests led to significant conclusions. In the long run, the levels of CO2 emissions and energy use do not have any influence on economic growth. Furthermore, there is a bidirectional causality among economic growth in terms of GDP and financial development variables. Thus, increasing financial development will generate more CO2 emissions and more energy use, and increasing economic growth will lead to rising financial development. In the short run, increasing financial development will generate more CO2 emissions and will lead to increased energy use and economic growth. Also, a bidirectional causality is being revealed between financial development and CO2 emissions. This indicates that financial development may help to reduce CO2 emissions.

Financial development and economic growth: Empirical evidence from Sub‐Saharan Africa

AbstractThis paper evaluates the impact of financial development on economic growth in a sample of 32 Sub‐Saharan Africa (SSA) countries. The countries were grouped into four sub‐regions, and data were collected for the period 1990–2016 on finance and growth indicators on an annual basis. In the estimation procedure, panel estimation and dynamic panel techniques were used. When the disaggregated components of financial development variables were used, findings, among others, reveal the role of credit to the private sector by banks (CPB) even though mixed, to have more impact on growth followed by broad money (BM) and liquidity liability (LL). However, an aggregated index of the financial development indicators via principal component analysis and their simultaneous interaction with human capital improvement brought about a greater positive impact on growth throughout the sub‐regions and the entire SSA.

Does Bank Profitability Stimulate Economic Growth in the Arab Region?

AbstractThis study empirically investigates the impact of bank profitability, as a complementary measure of financial development, on growth in the Arab countries between 1985 and 2016. Using a generalized method of moments (GMM) estimation to test the impact of the bank profitability on growth, this study utilises two variables in the econometric model which are return on assets and return on equity. This study reveals that both variables of bank profitability are positive and significant. This confirms that the bank profitability, beside other financial development variables, has positive impact on the growth. This study points out some important implications based on this result.