Financial Market Development Research Articles

American financial hegemony, global capital cycles, and the macroeconomic growth environment

AbstractGlobal financial cycles have become a growing concern for scholars and policymakers. Recent research has identified these cycles as originating in American markets, at least in part due to policy innovations in the United States. We articulate a previously unidentified, but powerful, mechanism that influence growth (and growth volatility) in the global economy: expansions in the American financial cycle disproportionately affect global credit conditions, leading to a higher incidence of gross capital inflow surges that subsequently create a boom‐bust growth dynamic in recipient economies. We evaluate this argument with an extensive empirical examination of 102 countries from 1975 to 2011 and find substantial support for the argument: US financial market developments produce capital flow cycles that challenge the ability of policymakers to stabilize their macroeconomies. We disaggregate capital flows and find that interbank lending plays a crucial role in driving these outcomes, with the results exhibiting a high degree of robustness to alternative specifications. Domestic policy tools alone may be insufficiently powerful to counteract volatility induced by these capital waves emanating from the core of the global financial system.

Efficacy of judicial independence in explaining financial markets in emerging markets

The relationship between institutional quality, financial development, and economic growth has been well documented in the literature. However, much less work has been done the effect of judicial independence (JI) on financial market development (FM) in particular. This paper fills that gap using the JI score and FM in the context of 23 emerging markets (as identified by the Financial Times Stock Exchange Group) over the period 1980–2021. Overall, the results suggest that, in selected emerging markets JI fosters FM. Interestingly, the results across various quantiles of JI show that low JI hampers FM, but a medium and high level of JI boosts FM in these markets. These results are robust to several specifications. To the best of our knowledge, this is the first study to examine the direct impact of JI on FM and confirms the theories on new institutional economics as well as law and finance in emerging markets.

Investigating the financial market development and shadow economy nexus in the presence of country risk in an emerging economy

This research study examined the influence of financial market development on the shadow economy and the moderating effect of country risk (political, economic, and financial) in this nexus in Pakistan. Using data from 1995 to 2018, the study applied the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests, followed by the F-bounds test to investigate stationarity and cointegration in the series, respectively. The study utilized the Autoregressive Distributed Lag (ARDL) approach to estimate the long-run relationship, and to examine the possible causal relationship among the variables, the study employed Breitung and Candelon's (2006) spectral test. The study identified that financial market development is negative, and the country's risk determinants are positively associated with the shadow economy's size. Moreover, the study found that country risk positively moderates the influence of financial market development on the shadow economy. The results also highlighted a unidirectional relationship from economic and financial risk towards the shadow economy. Finally, based on the empirical findings, the study recommends some policy implications to the regulators of financial markets and the shadow economy.

Macroeconomic Stability, Government Policies, and Financial Market Development: A Global Analysis of Transparent Governance, Anti-Monopoly Measures, and Legal Frameworks

This study explores the interplay between macroeconomic stability, government policies (transparency, anti-monopoly measures, legal frameworks), and financial market development. Drawing data from 125 countries over 11 years (2007-2017) with both parliamentary and presidential systems, various regression models are employed, including Ordinary Least Squares, Random and Fixed Effect Models. Prais-Winsten Regression addresses heteroskedasticity and autocorrelation. Results show a strong positive correlation between macroeconomic stability and financial market development. Transparent governance, anti-monopoly measures, and robust legal frameworks contribute significantly to both stability and financial growth. Transparent governance notably enhances the relationship between macroeconomic stability and financial market development globally and in presidential systems, but not in parliamentary systems. Effective anti-monopoly policies play a notable role in parliamentary systems, while legal frameworks maintain a positive influence across all scenarios. These findings are valuable for policymakers, investors, and researchers, informing their decision-making processes.

Does Equity Finance Improve Entrepreneurship Potency of Financial Sector Development?

Purpose: This study is exploring the holistic quadratic financial market development effect on entrepreneurship at the macroeconomic level and assesses the contrast of patterns because of the increase in the share of Islamic equity financing as a risk-sharing instrument. Method: An unbalanced panel data is acquired for selected Islamic banks of 21 nations to estimate Panel Quantile Regression (PQR) measuring the curvilinear financial market development effect and moderating role of Islamic equity financing in explaining the macroeconomic entrepreneurship index. Results: The results show that higher equity financing dissipates the debt burden of financing by sharing risks, thus motivating entrepreneurship at a macroeconomic level. Implications: Central Banks and Islamic advisory boards regulating banking systems innovate to integrate and increase equity based financial instruments as a financial inclusion policy in promoting a risk-sharing entrepreneurial ecosystem.

Determinants of profit repatriation: Evidence from the Czech Republic and OECD countries as a group

The paper examines the determinants of FDI profit repatriation in the Czech Republic and OECD countries as a group from 2013 to 2019. By applying the Lintner model about repatriation decisions at the national level, the paper finds the following findings. Firstly, the repatriation rate in the Czech Republic is higher than in most OECD countries. Secondly, financial development and investment opportunities negatively affect the payout ratio of OECD countries as a group, while the appreciation of host countries' currency and higher effective rates positively affect the payout ratio of OECD countries as a group. However, in the case of the Czech Republic, two factors that cause a higher payout ratio are financial development and anti-corruption enforcement. It implies that the Czech Republic should improve its financial market development and reduce the level of corruption to keep the profit from FDI in the country.

An analysis of the Russian financial market basis

Subject. This article analyzes the basis of the Russian financial market. Objectives. The article aims to clarify the basis of the Russian financial market. Methods. For the study, I used a systems approach based on a statistical analysis. Results. The article reveals a decrease in the reaction of inflation to an increase in the interest key rate and its growth with a decrease in the key interest rate. The article also finds that the Bank of Russia is injecting the digital ruble in order to increase its regulatory capacity. The study outlines a provision on the transfer of hedging of monetary policy risks to the level of relations between the Ministry of Finance of Russia and credit institutions, increasing their likelihood by selling yuan from the Russian National Wealth Fund and introducing a digital ruble. Conclusions and Relevance. The results of the study regarding the basis of the Russian financial market orient the expert community at the time of marginal income fixing and can be useful for the expert community in terms of the Russian financial market's development.

Research on the Influence of Financial Mathematics on Modern Financial Market

In the process of continuous reform and development of financial markets, financial theories are constantly updated and the research and development of financial mathematics becomes more and more important. This paper focuses on the impact of financial mathematics on modern financial markets. Starting from the emergence and development prospect of modern financial mathematics, the impact of financial mathematics on the development of modern financial market is comprehensively elaborated by analyzing financial mathematical theories, such as harness theory, stochastic optimal control theory and optimal stopping theory, and analyzing the application of mathematical models in financial theory. Financial mathematics not only effectively drives the innovation and iteration of financial instruments, but also has a direct role in the development of financial markets. The article focuses on the application of mathematical knowledge in several financial problems, aiming to provide reference and reference for advancing the application of mathematical knowledge in the field of finance.

Tackling the shadow economy through inflation and access to credit

How do changes in inflation and financial market development affect the size of the shadow economy? Previous studies show that lowering the tax rate, coupled with increasing the level of tax enforcement through policing and imposing high penalties for tax evasion may reduce the size of the shadow economy. While increasing the level of enforcement may be a viable strategy, most developing countries are unable to effectively enforce their tax laws. Based on empirical observations, we suggest that monetary authority could play an important role in this regard. Using a two-sector dynamic general equilibrium model of a small open economy, we demonstrate how monetary policy can be used to reduce the size of the shadow economy. The results suggest that, conditional on access to credit, a rise in inflation leads to a reduction in the size of the shadow economy. With little or no access to credit, such a policy will be ineffective. We evaluate alternative policy measures to achieve a targeted size of the informal sector.

A novel MOPSO-SODE algorithm for solving three-objective SR-ES-TR portfolio optimization problem

With the development of financial market, people invest their savings into different financial products to increase return. However, financial market is an extremely complex system, where investment opportunities and risk often coexist. For investors, it is necessary to take effective measures to avoid risk while obtaining considerable return. In recent decades, actively managing investment in the form of a portfolio is widely accepted by investors. In this paper, we propose a new three-objective Sortino ratio-expected shortfall-turnover rate (SR-ES-TR) portfolio optimization (PO) model. The Sortino ratio is used to measure the risk-adjusted rate of return. The expected shortfall is used to measure the tail risk of a portfolio. Portfolio liquidity risk is characterized by turnover rate. We constructed a portfolio of ten stocks and solved the SR-ES-TR model by the novel MOPSO-SODE algorithm. Compared with other four multi-objective algorithms, the better performance and validity in solving SR-ES-TR model by MOPSO-SODE algorithm have been verified.

Crypto-asset market development: the role of country’s institutional quality

PurposeCrypto-asset can be traded on many different exchanges worldwide with servers located in countries with different financial characteristics and institutional surroundings. Trading volume on these servers varies considerably regarding the server’s location, even though the prices do not differ greatly. Crypto-asset markets are poorly regulated and, as such, may leave a place for potential fraudulent activities and be linked to corruption. This paper aims to examine the role of country’s institutions in attracting Bitcoin traders.Design/methodology/approachAssuming heterogeneity between countries where crypto-asset exchange servers are located, the Pool Mean Group Estimator is used.FindingsResults indicate that, from institutional variables, corruption in the country attracts while internal and external conflicts repel investors. Additionally, the growth of global uncertainty and the decline in the local stock markets motivate investors to trade Bitcoin.Originality/valuePrevious research has empirically proved the importance of institutions’ quality for financial market development. This paper goes one step further and tries to empirically confirm the theoretical assumptions and investigate in detail the role of institutions in choosing servers in a particular country for Bitcoin trading.

The impact of financial development on the manufacturing industry in resource-rich countries: Empirical evidence from Azerbaijan

The study is devoted to assessing the causal relationship between financial development and economic growth in the manufacturing sector of Azerbaijan, a country rich in oil and gas resources. The study covers quarterly data from 2005-2021. The Johansen co-integration test and the Toda-Yamamota test are used to analyze temporal and causal characteristics between indicators. The results showed that there is no co-integration between financial development and growth in the long run. Along with this, no evidence was found indicating the presence of a causal relationship between variables in the short run. The results show that increased credit availability does not necessarily positively impact productivity and capital growth in the manufacturing sector. At the same time, the growth of loans contributes more to the growth of imports than to the growth of domestic production. The hypothesis about the negative impact of the "resource curse" on financial development is confirmed by financial market development in Azerbaijan, which makes it difficult to assess the securities market's impact on manufacturing sector growth. Research on the institutional aspects of financial regulation and finding ways to increase the relative attractiveness of the manufacturing sectors could provide more detailed recommendations to improve the effectiveness of financial instruments.

Central bank swap arrangements and exchange rate volatility: Evidence from China

We examine how bilateral currency swap arrangements (BSAs) conducted by the People's Bank of China affect bilateral exchange rate volatility from 2009 to 2019. Applying an intervention analysis based on the model-selection approach, we find 21 (16) significant (negative) effects out of the 37 cases. The results imply that BSAs may depress bilateral exchange rate volatility, but the effects vary across countries and sometimes can even be reversed. Further investigation shows that financial market development and bilateral political relationships are significant determinants of such an influential pattern. These findings contribute to the study of central bank swap and Renminbi internationalization.

FORECASTING OF THE MAIN SEGMENTS OF THE FINANCIAL MARKET OF UKRAINE

The article analyzes and builds economic and mathematical models for forecasting the main segments of the financial market of Ukraine:: the banking market; stock market; insurance market. The role of the financial market in modern civilized society is huge. Its functions include the mobilization of capital, its distribution among industries, control and support of the reproductive process, as well as increasing the efficiency of the economic system as a whole. The turning point for the Ukrainian financial market was 2022, namely the beginning of a full-scale Russian invasion, which led to the isolation of the financial market of Ukraine due to the introduction of martial law. In order to identify the key challenges for the development of the financial market, it is necessary to forecast the dynamics of its main segments using the tools of economic and mathematical modeling. A feature of the development of the domestic financial market is that the main part of the state’s financial resources is concentrated in such subjects of the financial system as deposit (commercial) banks; non-deposit financial intermediaries (insurance companies); subsidiary financial corporations (stock exchanges). According to the constructed forecasting models, it can be concluded that, all things being equal, in 2023 and 2024, the tendency to decrease the number of operating banks will continue and will be 59 and 54, respectively. As for the share of commercial banks with domestic capital, it will remain at the same level in 2023 and decrease by 4% in 2024. The number of insurance companies will decrease to 111 in 2023 and increase by 8 in 2024. Regarding the size of their assets, in 2023 there will be a decrease to the level of UAH 68,557 million, and a slight increase to the level of UAH 69,283 million in 2024. The share of the exchange market in the total volume of trades on the securities market will increase to 62% in 2022 and to 66% in 2023.

FINANCIAL FLOWS, FINANCIAL STABILITY AND MANAGING THE CAPITAL STRUCTURE IN EMERGING COUNTRY

New financial flows and the development of fin-tech are making up different rules of managing the structural of company’s capital. The globalization brings new views and acting of managers for using financial sources and rise of the company. So, capital structure is linked with financial market development, market conditions, availability of debt, type of industry sector as the control of managers. Capital structure is linked with company’s success. Measuring the profitability of the company is not enough due to the fact that there are cases where profitable company does bankrupt. That is the reason in this paper to analyze the financing performance and successful managing of the financial (capital) structure in Macedonia. The companies (the sample in the survey) are divided on companies which have opened bankruptcy proceeding in 2021 and companies which haven't opened bankruptcy proceeding in 2021. The analysis of the survey is done by Chi-square test, T-test and Levene's test for equality of variances.

Sharia Financial Literacy Analysis : Case Study of Traditional Market in Yogyakarta

As population growth and financial market developments increase, understanding financial literacy becomes important in order to create a quality society on ability to plan and manage their finances well. This research aims to determine the Sharia financial literacy level on traditional market traders in Yogyakarta. This research aims to determine the level of Sharia financial literacy on traditional market traders in Yogyakarta. This research used primary data consisting of 22 traditional markets in Yogyakarta out of 100 respondents. The method used in this research is Chi-Square analysis and processed by SPSS 20.0 for the Windows program . There are four independent variables that were used such as gender, age, education and expenditure. Meanwhile, the dependent variable is Sharia financial literacy either in the knowledge or in the capability of the respondents. The results of the statistics test revealed that traditional market traders have a medium level of knowledge and capability in Sharia financial literacy. The variables of age, education and expenditure show that there are differences in the level of Sharia financial literacy. Meanwhile, the variable of gender showed there is no difference at this level among traditional market traders in the City of Yogyakarta.

The Disaggregated Impact of Financial Development on the Effectiveness of Monetary Policy in Nigeria

The fast development in the financial system has attracted researchers’ interest in studying its implication on the economy, though empirical evidence is highly limited on disaggregated levels. This study is undertaken to examine the impact of disaggregated financial development on the effectiveness of monetary policy in Nigeria. The study used Autoregressive Distributed Lag Model to capture the data-generating process as well as both short-run and long-run relationships. The scope of analysis ranged from 2000 quarter 1 to 2021 quarter 4 to circumvent the effect of regime changes, as the chosen time horizon represents the period of the uninterrupted civilian regime in Nigeria. The data are sourced from the Central Bank of Nigeria’s and the International Monetary Fund’s statistical databases. Moreso, quarterly frequency data are used to reflect the short-run nature of the monetary policy. The finding reveals financial market development enhances the effectiveness of monetary policy in terms of achieving both its primary and secondary objectives while financial institutions development does not. Given the findings, it is recommended that the Government together with the Central Bank of Nigeria should design policies that would enhance the efficiency of the financial market, particularly markets infrastructure and technology-based products to reduce information asymmetry and transactional costs to ease the way of doing business.

The heterogeneous effect of technology and macroeconomic policies on financial market development

The heterogeneous effect of technology and macroeconomic policies on financial market development

Spatial spillover effect of Green Finance and Clean Energy on China's Provincial Green Economic Development.

Green finance is a new financing mode that pays attention to environmental benefits. Achieving a balance between the economy and the environment requires clean energy. For formulating policies to achieve sustainable development goals, it is very important to explore whether integrating green finance and clean energy is conducive to promoting green economic development (GED). This study applies a non-radial directional distance function (NDDF) to assess China's provincial GED using panel data from 2007 to 2020. It adopts the spatial Durbin model to empirically analyze the spatial spillover effects of green finance and clean energy on GED. The results indicate that: 1) The influence of green finance on GED shows a "U" curve relationship of first suppression and then rise. 2) A 1% increase in the synergy between green finance and clean energy yields a 0.1712% raise in the local GED and a 0.3482% boost to the surrounding area's GED through spatial spillovers. 3) The integration of green credit and clean energy has an apparent spatial spillover effect, and the interaction between green securities and clean energy can promote local GED. This study suggests that the government should accelerate and improve the development of a green financial market and establish a long-term linkage and co-ordination mechanism for the promotion of GED. It is crucial that financial institutions allocate more resources to clean energy development, and all regions will have to utilize the spatial spillover effect of clean energy to facilitate China's economic transformation and development in theory and practice.

An Empirical Study on the Driving Factors of Financial Management Behavior of the Middle-Aged and Elderly Based on Logistic Model

With the rapid development of economy and society, people's demand and participation in investment and financial management are also gradually increasing. With the advent of an aging society, the participation of the middle-aged and elderly people in investment and financial management behavior is also gradually increasing, but so far, there is still a large space for development. This paper takes the middle-aged and elderly people as the research object, analyzes the basic situation of the middle-aged and elderly people's investment and financial decision-making through the literature analysis method, collects the specific data of the factors affecting the investment and financial decision-making through the questionnaire survey, and uses the logistic model and other methods to analyze the data. Finally, the regression analysis results show that age, financial knowledge, herding, risk preference and future expectation will have a significant impact on the investment and financial decision-making of the elderly. Through this research, this paper hopes to provide relevant financial institutions with opinions and references related to products, help the middle-aged and elderly people avoid the risk of financial fraud, and make a certain contribution to the development of financial market and the improvement of the participation of the middle-aged and elderly people in investment and financial management.