Financial Development Indicators Research Articles

Energy substitution in Africa: Cross-regional differentiation effects

Although Africa has immense non-renewable energy resources and an unexplored renewable energy potential, this region is relatively less studied with regard to energy substitution. Using a non-linear modeling through the PSTR technique in 43 countries during the period 2005–2021, this paper fills the existing gap, and also includes human capital and institutional factors to capture the characteristics of populations and governance in succeeding to energy substitution. The results support the existence of one transition or two regimes. The findings show that energy substitution is effective when economic growth reaches the optimal threshold of 7.23%. Only beyond this threshold, institutional quality and human capital facilitate transitioning towards green energy respectively by 0.414% and 0.524%. These results are unchanged regardless of the institutional quality or financial development indicators used. However, cross-regional differentiation effects are underlined between Eastern, Middle, and Western Africa on the one hand, and Northern and Southern Africa on the other. The first three regions show similar path, and improving the corruption perceptions index or anti-corruption measures are inefficient in the low-growth regime. In Northern and Southern Africa, human capital, once the full potential is reached in the third regime, becomes ineffective.

Financing the energy transition in a green sub‐Saharan African (SSA) environment: Does energy intensity matter?

AbstractThis study looked at the impact of financial development, environmental sustainability and energy intensity on the transition of SSA countries to safe and green energy use. This was pursued using a dynamic panel model—system generalized method of moments (SGMM), given its capacity to address endogeneity problems in panel estimation processes. The study used datasets covering a 25‐year period (1995–2020) for 46 countries out of 52 SSA countries chosen on the basis of the availability of data on energy and financial development indicators. Findings arising from this study are summarized as follows: firstly, that energy transition is negatively responsive to the monetization ratio and positively responsive to bank development. Secondly, that the energy transition is a response to increasing emissions in the studied countries. In addition, it was discovered that the greater the degree of energy intensity (energy inefficiency), the higher the need for an energy transition. Energy sources whose intensity vary inversely with productive activities are recommended for SSA countries. Also, to meet the Paris climate goals, there is the need for policies that drive energy transitions while decoupling and reducing the use of fossil fuels.

Does financial development has (a)symmetric effect on environmental quality: insights from South Africa

PurposeThis paper investigates the (a)symmetric effects of financial development in the presence of economic growth, energy consumption, urbanization and foreign direct investment on environmental quality of South Africa between 1980 and 2017.Design/methodology/approachA robust measure of financial development is generated using banking institutions and non-banking institutions market-based financial development indicators, while environmental quality is measured using carbon footprint, non-carbon footprint and ecological footprint. The objectives of the study are captured using linear and non-linear autoregressive distributed lag.FindingsThe result from the symmetric analysis suggests that financial development stimulates carbon footprint and ecological footprint in the short run; however, financial development abates non-carbon footprint. In the long run, financial development has a significant negative effect on carbon footprint and ecological footprint. However, the asymmetric analysis established strong asymmetric effect in the short run, while no asymmetric effect is found in the long run. The short run asymmetric analysis reveals that positive shock in financial development increases carbon footprint and ecological footprint; however, positive changes in financial development reduce non-carbon footprint. Negative shocks in financial development, on the other hand, have a positive impact carbon footprint, non-carbon footprint and ecological footprint.Practical implicationsThe study's outcome implies that the concept of “more finance, more growth” could also be applied to “more finance, better environment” in South Africa. The study offers vital policy suggestions for the realization of sustainable development in South Africa.Originality/valueThis empiric adds to the body of knowledge on the influence of financial development on various components of environmental quality (carbon footprint, non-carbon footprint and ecological footprint) in South Africa.

중국 디지털 포용적 금융이 경제 발전에 미치는 영향

The purpose of this study is to analyze the impact of digital inclusive finance on the economic development of Shandong Province in the background of rapid economic development. By establishing an economic development index system, this study uses a panel model for economic development data and digital inclusive financial development index from 2011 to 2020 for 16 provinces in Shandong Province to determine whether digital inclusive financial development in Shandong is the economy of Shandong Province. The effect on development was empirically analyzed. The analysis results are as follows. First, it was found that digital inclusive finance had a significant positive (+) effect on Shandong's economic development. Second, it was found that the breadth of coverage, the operational depth, the degree of digitization had a significant positive (+) effect on the economic development of Shandong Province.

Does Financial Development Lower Energy Intensity in India?

Although the relationship between finance and growth is gaining significant attention, little is known about how financial development indicators affect energy intensity in emerging nations. Given the complexity of the growth effects of financial development and energy intensity dynamics, the present paper investigates the effect of financial development and economic growth on energy intensity in India using Autoregressive Distributed Lag (ARDL) bounds testing approach. The result indicates that financial development indicators and economic growth had a long-run relationship with energy intensity. Besides, the empirical results reveal that financial development and economic growth had a negative and significant impact on energy intensity in the short and long-run, inferring that financial development and economic growth lower energy intensity in the country. The findings are helpful for India's policymakers in order to maintain the complementarity between financial development and energy intensity.

Governance content, financial risk and innovation: A panel data analysis

The effects of governance content characteristics, financial risk, financial development, and innovation infrastructure variables on the size of patent applications in advanced nations during the post-crisis period are examined in this research. For the 2010-2015 period, a panel dataset of 29 advanced economies was employed. The paper uses a Poisson and a Negative Binomial framework to accommodate national heterogeneity and dispersion concerns. According to the estimation results, financial development and financial risk index benefit patent applications, research and development expenditure, intellectual property rights, and gross fixed capital creation. In addition, according to this study, controlling corruption and upholding the rule of law boost innovation, whereas regulatory quality inhibits innovation in advanced economies.

FINANCIAL DEVELOPMENT, FINANCIAL INCLUSION AND INFORMALITY: NEW INTERNATIONAL EVIDENCE

This paper explores the empirical relationship between informality and several indicators of financial development (FD) and financial inclusion (FI). We exploit a panel of 152 countries with annual information between 1991 and 2017. Using panel cointegration techniques, we find evidence of a negative long-run relationship between informality and FD/FI for different groups of countries. Moreover, exogeneity tests indicate that some FD/FI indicators cause less informality. Specifically, we find that in developing countries FD reduces informality when measured as “financial credit” and “bank credit”, whereas FI reduces informality when measured as “number of bank accounts”. These results suggest that higher credit and more bank accounts have contributed to reducing informality in developing countries in the long run. Additionally, we find evidence of double causality between informality and other FD/FI indicators in developing and Latin American countries.

A Study on Credit Data-Based Poverty Alleviation in Rural Yunnan, China.

The main path of development credit funds in rural poverty alleviation in Y province is crucial. This paper studies the rural poverty alleviation work in extreme poverty areas in Yunnan and puts forward targeted and instructive policy suggestions for specific difficult areas. Research the relationship between credit resource allocation and rural poverty alleviation. The existing research is mainly based on the relationship between financial development and economic growth, income growth, income distribution, and, on the surface, the relationship between the scale of financial development and the efficiency of financial development and other indicators. The purpose is to put forward targeted measures and suggestions on the basis of theoretical research and model analysis to help the Yunnan banking industry support poverty alleviation. The results of the study show that there is a causal relationship between agriculture-related loans.

Inclusive growth and the sophisticated influence of carbon emissions, renewable energy, and financial development: An introspective analysis of Africa

ABSTRACT This study investigates how inclusive growth is affected by carbon emission, renewable energy, and the new financial development index using 48 African countries categorized into low-income countries (LIC) and middle-income countries (MIC) spanning from 2000 to 2018. Bearing in mind the presence of residual cross-sectional reliance and heterogeneity in a panel data settings, the study employed robust estimations econometric approaches which includes the Augmented Mean group (AMG), Driscoll-Kraay (DK) standard errors method together with the Correlated Effects Mean Group (CCEMG) technique. The study’s outcomes from the mentioned approaches showed that; carbon emission positively affects inclusive growth in aggregate African panel, and LIC but not in MIC panels correspondingly. Furthermore, renewable energy significantly mitigates inclusive growth in LIC group African nations, but not significant in Africa as a whole or in MIC country grouping. Financial development is homogeneously positive and significant, with inclusive growth across all panels of African economies. The outlined outcomes were also confirmed by the Generalized Method of Moments (System-GMM). Based on the outlined study preferably suggest that carbon emission in LIC must be focused on attracting investments with low carbon footprints. On renewable energy, it is further recommended that both LIC and MIC should sticks to the African Renewable Energy Initiative.

Threshold effects of financial development on foreign listing: the roles of venture capital in developed and emerging countries

ABSTRACT This paper examines financing abroad from the perspective of international financial development. We find that foreign listing activities are significantly associated with financial development indices, such as stock trading, domestic credit, soundness of banks, venture capital availability and financing by local equity markets. The spillover effect is more pronounced in emerging countries. A threshold model with a macro dynamic panel of 37 countries from 2006 to 2020 suggests that foreign listings and financial development (stock trading and venture capital availability) follow an inverted U-shaped pattern, while foreign listings and domestic credit follow a diminishing pattern. The policy and managerial implications indicate that countries face varying demands for foreign listings at different stages of financial development. When making decisions on seeking foreign capital policymakers should follow closely the changes in domestic financial development and institutions.

The Non-Linear Impact of Financial Development on Environmental Quality and Sustainability: Evidence from G7 Countries.

This paper analyses the impact of financial development on the environmental quality and sustainability for the group of G7 countries over the period 1990–2019 based on static panel data-fixed effect models. The objective is to explore if there exists a non-linear relationship between the whole financial system development and a wide array of measures of environmental sustainability and degradation, namely adjusted net savings, greenhouse gas, CO2, methane, nitrous oxide emissions and ecological footprint. We define a new Financial Environmental Kuznets Curve (FEKC) by introducing the square term of financial development on the environment-finance relationship. Empirical results prove the existence of non-linear relationships between the composite index of financial development and environmental degradation for the group of advanced economies. In the case of methane, we validate the presence of an inverted-U shape association in line with the FEKC hypothesis, while for greenhouse gas and CO2 the link follows a U-shaped pattern. The impact of financial development on environmental sustainability is monotonically positive and statistically significant while the ecological footprint is not statistically linked with the level of financial development within G7 countries. Economic growth, human capital, population density and primary energy consumption appear as significant drivers of environmental quality and sustainability.

Impact of financial development on the energy intensity of developing countries

Climate change is an important and urgent challenge facing the world, affecting the survival and development of human beings from multiple dimensions such as environment and economy. Carbon emissions are a barometer of climate change, and energy consumption is closely related to carbon emissions. Reducing energy consumption can reduce carbon emissions, thereby optimizing the human living environment. Compared with developed countries, the carbon emissions and energy consumption of developing countries are still growing strongly, so it's significant to study the energy consumption of developing countries. Energy intensity can be reduced through reducing energy intensity, and financial development can have an impact on energy intensity. So, using panel data from 67 developing countries from 1995 to 2018, this study selected six financial development indicators and uses the system Generalized Method of Moments (sys-GMM for short) establishes a dynamic panel model to study the impact of financial development on energy intensity from the six aspects of access, depth and efficiency of financial institutions and financial markets, which are more implementable and more realistic for formulating relevant financial policies to reduce energy intensity. We introduced the index of industrial structure upgrading and studied the interaction between financial development and financial development in the impact of financial development on energy intensity for the first time. The findings revealed that improving financial institutions' access, depth, and efficiency, as well as financial markets' access, depth, and efficiency, might dramatically lower developing countries' energy intensity. The improvement of industrial structure resulted in a reduction in the energy intensity of financial development. Furthermore, the 67 developing countries were grouped from five different perspectives, and the influence of financial development on energy intensity reduction was found to be robust. Therefore, the research results significantly reduce energy intensity for financial development in developing countries.

Digital Inclusive Finance Data Mining and Model-Driven Analysis of the Impact of Urban-Rural Income Gap

Digital inclusive finance, rural human capital, and agricultural green total factor productivity are simultaneously incorporated into the framework of urban-rural income gap analysis. Based on digital inclusive finance indices from several provincial panel data in China, a systematic generalized moment estimation method is used to the moderating effect of rural human capital and the mediating role of agricultural green total factor productivity. Annual time series data of foreign trade indicators and urban-rural income gap indicators are estimated by building a state-space model and applying Kalman filter to investigate the effects of these factors on the urban-rural income gap. The results show that the impact of urban-rural fixed asset investment ratio and foreign trade indicator on the urban-rural income gap in China tends to increase gradually, while the impact of rural financial development indicator is decreasing but still positive. The study finds that the development of digital inclusive finance significantly contributes to the reduction of the income gap between urban and rural residents; the breadth of coverage of digital inclusive finance and the degree of digitalization help to suppress the widening of the income gap between urban and rural residents; and rural health-based human capital, education and training-based human capital, and migration-based human capital not only have a convergence effect on the income gap between urban and rural residents themselves.

Role of Financial Development on Economic Complexity: An Empirical Evidence from 33 BRI Countries

Economic complexity plays a prominent role in the economic development of countries. So, economies need to improve their level of product sophistication. Several, researchers have mostly neglected the concept of economic complexity and its detrimental factors. Few economists have determined economic complexity with the help of socioeconomic determinants, while others have determined economic complexity through financial development index and institutions. This study employed the Generalize Method of Movement (GMM) to estimate the empirical inferences to cater the effects of endogeneity. Fiscal policy stances such as the log of final government consumption, GDP per capita income, institutions, and the lagged economic complexity have shown a positive and enormous impact on economic complexity. The findings of the current study have elucidated that the financial development index itself is negatively insignificant for economic complexity. However, after introducing the term ‘interaction’ with ‘institutions’, it reflected a positive and significant impact on economic complexity. So, as a policy measure, the selected sample BRI countries must regulate their finance system which would improve their institutional structure.

Ekonomik Büyüme ve Sermayenin Finansal Gelişme Üzerindeki Etkisi: Türkiye Örneğinde Finansal Küreselleşmenin Rolünün ARDL Sınır Testi Yaklaşımı İle Analizi

The aim of this study is to examine the impact of economic growth, capital and financial globalization on financial development for the period 1990-2018 in the case of Turkey. In the analysis, credits to the private sector were used as an indicator of financial development. The measure of globalization is based on the KOF financial globalization index. The long-run relationship between the series was revealed with the ARDL Bounds Test approach and a long-run prediction was made. As a result of the analysis, the effect of all variables on financial development was found to be positive and statistically significant. Long-run estimating was also made with FMOLS, DOLS and CCR models to demonstrate the reliability of the ARDL model. In all models, it was found that the estimation results were consistent with each other. In the latest Toda Yamamoto causality analysis, the bidirectional causality relationship between financial development and GDP and capital was identified. A unidirectional causality relationship from financial globalization to financial development has been found. Therefore, it has been concluded that financial globalization is an important factor in the growth and development process of the financial system in Turkey.

Determination of Financial Stability Index Between Southeast Asian Countries (ASEAN 6) and Its Intracorrelation

The Economic crisis has impacted the disruption of the stability of a country's financial system, including ASEAN countries. In Indonesia, there is a Financial System Stability Committee (KSSK) whose duties are to coordinate monitoring and maintaining financial system stability. KSSK has the authority to set the criteria and indicators for assessing financial system stability conditions concerning the financial system's stability. The second authority is to evaluate the condition of financial system stability based on input from each member of the Financial System Stability Committee, along with supporting data and information. As an economic area with history, ASEAN countries certainly have a relationship, either strong or weak. This study conducted calculations of the financial stability index (Aggregate Financial Stability Index) built from the Morris framework (2010) consisting of sub-index Financial Development Index, Financial Vulnerability Index, Financial Soundness Index, World Economic Climate Index. The calculation results showed that in ASEAN 6, there were fluctuations in financial stability, and there were variations in the correlation of financial stability. Therefore, improving the financial stability in Indonesia needs to consider the existence of financial stability in other countries.

“Lazy banks” and “Safe asset” Hypothesis: Is it the answer for Public Debt and Financial Development Indicators Puzzle in Emerging Markets?

This paper investigates the role of public debt in financial development in an emerging market namely, Jordan. Based on previous empirical research, we test the empirical prediction of two hypotheses for the role of public debt: “safe asset” vs “lazy banks”. Using annual data over the period of 2008 to 2018 and using the Fixed Effect (FE) and Bias Correction Fixed Effects (BCFE) methodologies that control for both unobservable banks specific and time-specific variables. We find that public debt has a positive impact on financial development after controlling for Banks size, Banks risk. ROA, Capital Adequacy, and Banks Capitalization. The results provide weak evidence consistent with the “Safe Asset” hypothesis that banks choose to invest in treasury securities as safe assets.

YENİLENEBİLİR ENERJİ TÜKETİMİ, FİNANSAL GELİŞMİŞLİK VE EKONOMİK BÜYÜME ARASINDAKİ İLİŞKİ: IEA ÜLKELERİ ÜZERİNE UYGULAMA

The need for energy sources is increasing day by day. However, limited energy resources lead economies to use renewable energy resources. This paper explores the relations between renewable energy consumption, financial development, and economic growth. The study employs ARDL approach to investigate the long-term and short-term cointegration correlations between variables. The current paper focuses on the period 1996-2017 to investigate whether financial development indicators can play a role on renewable energy consumption for twelve IEA countries. According to panel cointegration test results, long-term variables are statistically significant. Also economic growth is observed affecting renewable energy consumption positively in the short term. According to panel causality test results in the short-term there is relation between financial development and renewable energy consumption, and economic growth and renewable energy consumption. Finally, the use of subcomponents of financial development indicator have efficiently captured the different aspects of financial system affecting renewable energy consumption.

The relationship between financial development and economic growth: The issue of nonlinearity

Subject. This article explores the relationship between financial development and economic growth. Objectives. The article aims to summarize the results of studies that reveal the statistical properties of the relationship between financial development and economic growth, and test the hypothesis regarding the nonlinear nature of this relationship through empirical research. Methods. For the study, I used analysis, systematization, and the fixed effects model. Results. The article describes the six main mechanisms that cause the effect of nonlinearity of the relationship between finance and growth, and reveals the properties of the nonlinearity of the analyzed relationship in the course of empirical analysis for 43 OECD countries for the period from 1990 to 2019. Conclusions and Relevance. The article concludes that the regulator needs closer control over the loan state and dynamics, and readiness to apply, in appropriate cases, the tactics of slowing down credit expansion. Measures to restore the functionality of financial systems in terms of their role as allocative mechanisms are also important, which follows from the analysis of the sources of nonlinearity of the relationship under consideration. The results of the study can be used by financial regulators when setting targets for the indicators of financial development and formulating policies based on the principle of harmonizing the goals of financial development and economic growth.

DOES TOURISM INFLUENCE FINANCIAL DEVELOPMENT IN KENYA?

Objective: In this study, we investigate the impact of tourism on financial development in Kenya using time series data from 1995 to 2017. The study uses the autoregressive distributed lag (ARDL) bound testing approach to cointegration and error correction model to examine this connection. To increase the robustness of the results, the study uses two proxies of financial development, namely broad money (bank-based financial development proxy) and total value of stocks traded (market-based financial development proxy). Results show that tourism has an insignificant impact on financial development in Kenya – both in the short run and in the long run. The results are relevant regardless of whether the financial development is proxied by a bank-based financial development indicator or by a market-based financial development indicator. This finding points to the fact that, although tourism is one of the main sources of foreign exchange in Kenya, it has no direct impact on financial development. The findings from this study add value to policy makers in Kenya by revealing the insignificant impact that tourism has on financial development, although this is in contrast to other studies that found a positive contribution. Based on the findings, Kenya may not anchor its financial development policies on tourism.