Sector Development Indicators Research Articles

Information technology and financial development for achieving sustainable development goals

The present study aims to answer the question of the effectiveness of information and communication technologies (ICT) and financial development in achieving sustainable development goals (SDGs). Specifically, it examines the joint effects of ICT (mobile phone and internet use) and eight financial sector development indicators on achieving economic, social, and environmental sustainability in light of the SDGs using data from 48 Sub-Saharan African countries. Using the system Generalized Method of Moments, we found that (i) the four dimensions of financial development and both indicators of ICT increase economic, social, and environmental sustainability, (ii) increasing the access to mobile phones and the use of Internet contributes to the development of the financial sector, (iii) the contribution of financial sector development on the achievement of the SDGs increases with the presence of ICT. The study calls on policymakers to consider the diffusion of ICT and the advantages they offer in elaborating measures for achieving sustainable development goals.

Non-linear dynamics in finance–inequality nexus: time series evidence from the Indian economy

PurposeThe principal aim of this study is to examine the relationship between financial development and income inequality in India using the financial Kuznets curve (FKC) hypothesis.Design/methodology/approachThis study uses the autoregressive distributed lag (ARDL) model and the Toda–-Yamamoto causality test to investigate the long-run and short-run relationship and causality between financial development and income inequality. In addition, this study employs a principal component analysis (PCA) to construct a comprehensive financial development index.FindingsThe study found a long-run relationship between financial development and income inequality in India for the period under consideration. Trade is found to improve the income distribution, while inflation worsens income distribution. Moreover, the empirical results revealed a feedback causality between financial development and income inequality. The study results confirm an inverted U-shaped relationship between financial sector development indicators and income inequality, thus validating the FKC hypothesis for the Indian economy.Research limitations/implicationsThe study draws attention of the government and policymakers, urging them to focus on building a strong financial sector by improving its efficiency. This, in turn, will lead to enhanced financial stability and a reduction in income inequality. They should prioritise the development of high-quality and sustainable financial products and services to ensure the robust growth of the financial sector.Originality/valueTo the best of our knowledge, this study is the latest of its kind to empirically test the financial development on income inequality and the FKC hypothesis simultaneously for the Indian economy using financial proxy variables from financial institutions (FIs) and financial markets (FMs) for the measurement of financial depth.

Environmental Risk and Foreign Direct Investment: the role of Financial Sector Development

The study examines the role of financial sector development in the relationship between Foreign direct investment (FDI) and environmental risk using a more comprehensive measurement of financial sector development. The study set up a panel dataset to cover 45 Sub-Saharan African economies from 1982 to 2018 and applies the system GMM technique to accommodate the dynamic nature of the dataset and make provisions for endogeneity and heteroskedasticity in the series. The findings suggest that the unmitigated effect of FDI on environmental risk is detrimental. However, FDI conditioned on the local financial sector development minimizes environmental risk. Again, the findings suggest that countries with low financial sector development indicators report worse environmental risk than their counterparts.The financial sector development is a composite index comprising financial depth, access, and efficiency. Hence, as a matter of policy, we suggest that countries should make a conscious effort to further develop these components by investing in financial infrastructures like technology, regulations, and institutions.

The influences of Interest rate volatility on banking sector development: Evidence from cross countries in the MENA region

This study investigates the dynamic relationship between a set of banking sector development indicators and interest rate volatility for 12 emerging market countries during the period of 1980-2019. For this purpose, the bounds testing within autoregressive distributed lag (ARDL) methodology is employed. The empirical results reveal that the interest rate volatility has negative impacts on the majority of the banking sector development indicators which also play a significant role in dampening the banking sector development path in the long-run. These findings suggest that the banking sectors of emerging countries are vulnerable to interest rate risks. Thus, the results have important implications for policymakers to improve the banking system and to promote economic growth of emerging economies.

Banking Sector Intermediation Development and Economic Growth: Evidence from Nigeria

ABSTRACT In developing economies, banks act as a conduit for the efficient mobilization of financial resources from the surplus sectors for effective allocation to the deficit sectors for productive investment that will in turn lead to economic growth. Thus, the study is aimed at evaluating whether development in the banking sector intermediation process in the form of an increase in the number of branches, credit to private sectors, intermediation efficiency and total assets stimulated economic growth in Nigeria during the period 1987⎯2018. The study employed the Johansen cointegration test, dynamic ordinary least square regression and error correction model in determining the relationship between the variables. The results of the cointegration test confirmed the existence of a long-run relationship between banking sector development indicators and economic growth in Nigeria; whereas in the short-run only number of bank branches and bank’s total assets have a positive and significant impact on economic growth, signifying that much of Nigeria’s superior growth performance is attributed to an increase in the number of bank branches and growth in the bank’s total assets. Going by the above findings, the study recommends that the Central Bank of Nigeria should monitor the activities of Commercial Banks in terms of branch distribution to ensure a wider spread and even distribution and also review the asset base of banks from time to time so as to measure up to international standards in order to increase investment and economic growth.

Financial Development, Financial Inclusion and Primary Energy Use: Evidence from the European Union Transition Economies

The main objective of the research is to analyze the impact of financial sector development indicators and financial institutions access on primary energy use based on a sample of European Union transition members over 20 years period (1996–2017) through panel cointegration and causality tests that allow for cross-section dependence. The causality analysis revealed that the direction of the causality among financial development indicators, financial institutions access, and primary energy use varied among the countries. On the other side, panel cointegration coefficients disclosed that the financial development index positively affected the primary energy use, but private credit did not have a significant effect on the primary energy use. Furthermore, financial institutions’ access had a significant negative impact on primary energy use. However, country-level cointegration coefficients indicated that the financial development index positively affected the primary energy use in Bulgaria, Croatia, Czechia, Hungary, and Slovenia, and private credit also had a positive impact on primary energy use in Bulgaria, Czechia, Estonia, Hungary, Lithuania, Poland, and Slovakia, but the effect of financial development index on primary energy use was found to be very higher than that of private credit. Moreover, financial institutions’ access negatively affected the primary energy use in Croatia, Estonia, Hungary, Poland, and Romania.

The impact of the public budget deficit in promoting the development of the financial sector: Gulf Cooperation Council countries as a model

The research aims to provide a deep and comprehensive picture of the theoretical frameworks and empirical studies that dealt with the analysis and interpretation of the mechanism and channels of the impact that can be exercised by high levels of public budget deficit in strengthening and developing the financial sector, in addition to foreseeing an objective quantitative model that can diagnose the nature, size, and direction of this impact. And the interpretation of its transmission mechanism and channels, by adopting the methodology of aggregate regression models (PRM), static effect (FEM), and random effect (REM) that are based on the balanced longitudinal data (Balanced Panel Data) for the Gulf Cooperation Council countries for the period (2005-2017). The results of the assessment revealed the contribution of the public budget deficit variable in its negative impact on the financial sector development indicators, (BC) which expresses the bank credit granted to the private sector as a percentage of GDP, and (TD) which refers to the bank credit granted as a percentage Of total bank deposits, while its negative impact was shared in the two financial sector development indicators, (SMC), which expresses the ratio of market value to the gross domestic product, and (SMT), which reflects the stock market turnover and the economic growth variable (GRO) also influenced Negative in both (BC) and (TD).

Статистичне моделювання розвитку енергетичного ринку в регіонах України

The article is aimed at modeling the energy market of Ukraine on the meso-level, identifying its features and development problems, forming a system of indicators for monitoring the development of electricity production at the regional level. It is determined that Ukraine produces electrical power mainly from non-renewable energy sources, namely fossil and mineral fuels, using nuclear power plants and thermal power plants, which comprises 54% of the total electricity production. Wind, solar sources of electrical power, biofuels and hydroelectric power plants make up a smaller part of production – 7%. It is noted that Ukraine annually consumes about 92 million tonnes of oil equivalent (toe) of energy, has a high level of energy intensity of the economy, therefore, in order to reach the world average level, it is necessary to reduce energy consumption by 50 million toe. The level of losses of the produced and imported energy during its transformation and transportation to the end user is 44%. The potential for reducing energy consumption during consumption in sectors such as housing, budget-based and energy supply is about 19 million toe. To assess the state of the energy sector in Ukraine in 2019, a grouping of regions of Ukraine was carried out using cluster analysis. The regions that have entered the 1st cluster, namely: Dnipropetrovsk, Donetsk and Zaporizhzhia regions, have the best prospects for the rapid innovative development of the energy market. The regions that are included in the 3rd cluster have the lowest values of energy sector development indicators among other clusters and require special attention to the development of new, cost-effective energy technologies. The system of indicators for the analysis of the energy market development on meso-level is substantiated. The proposed indicators are adapted to the indicators of monitoring the achievement of sustainable development goals, namely: sustainable development goals 7 «Ensuring access to inexpensive, reliable, sustainable and modern energy sources for everyone».

Financial development and economic growth in SADC countries: a panel study

PurposeThe impact of financial development on economic growth has received considerable attention since the 2008/2009 global financial crisis. High levels of credit to the private sector were partly to blame for the crisis, and this has re-ignited the debate on whether the growth-enhancing effects of financial development outweigh the retarding effects associated with financial crises. This paper therefore examines the financial development–growth nexus in SADC countries during the period 1990–2015.Design/methodology/approachThe empirical analysis is conducted using the pooled mean group estimator. Furthermore, financial development indices are created due to the strong correlations between the individual financial development indicators using principal component analysis.FindingsThe results show that financial development, captured by the indices or the individual financial development indicators, has a negative impact on economic growth in the long term.Research limitations/implicationsDue to the unavailability of data, the study only focussed on banking sector development. The researcher would have preferred to incorporate stock market development.Practical implicationsDue to financial vulnerabilities emanating from an inadequate monitoring and supervisory framework, further enhancement of financial development should be undertaken with caution in SADC countries. Therefore, institutional quality should be enhanced in order for SADC countries to benefit from the development of the financial sector.Originality/valueMost studies investigating the financial development–growth nexus in SADC countries utilise the individual measures of financial development which often produce contradicting results. This study constructs financial development indices to capture the impact of various banking sector development indicators on growth.

Financial sector development convergence in Africa: Evidence from bank- and market-based measures

In this paper, we employ data from 46 African countries over the period 1980–2014 to examine financial sector development convergence, using bank- and market-based measures of financial development. Within the framework of the generalized method of moments (GMM), we present evidence that both the bank– and market–based financial sector development in Africa diverge over time. However, we find strong evidence of financial development divergence when using bank-based financial sector development indicators whereas this evidence is weaker for market-based indicators. Given the divergence in the level of finance, the gap between countries with underdeveloped and well–developed financial markets will continue to widen as financially less developed countries do not appear to catch-up with the financially more developed economies. Keywords: Financial development; divergence, convergence, AfricaJEL Classification: F15, F36, G01, O55

Assessment of the relationship between the tourism sector development and other sectors of economy

An assessment of a relationship between aggregated and partial indicators of the tourist sector development on one hand and other sectors of economy and society on other hand are investigated in the paper. Indicators are expressed in both direct monetary terms and rating scales. The study covers 149 countries in 2016. The results of the study indicate a positive relationship between the development of the tourist sector and the level of economic welfare of the country. This is explained by fact that tourist goods and services are subject of a second necessity and demand for they increases significantly with growth of income level. Found that there is a positive correlation between indicators of tourism sector development and indicators of quality of socio-economic environment. This may be due to fact that, on one hand, high quality socioeconomic environment stimulates visits to country; on other hand, travels stimulate growth of economy and welfare of citizens who live in territory that visited. Further analysis of aggregate of countries, divided into 4 groups by income, showed mixed results. Thus, a stronger correlation between all analyzed indicators is observed in low and high-income countries, weakening in transition to averages by a sample of values. However, such a weak relationship for some countries may be a consequence of a small share of the tourism sector in the economy. This paper differs from previous researches by focusing on a large sample of countries and reveals the relationship between tourism sector development indicators and socioeconomic environment indicators. One can speak of objectivity of results obtained, since they are confirmed both using Spearman’s correlation coefficient and Kendall’s Tau correlation.

Financial development and economic growth: panel evidence from BRICS

Purpose The purpose of this paper is to examine the relationship between financial development and economic growth for five major emerging economies: Brazil, Russia, India, China and South (BRICS) during 1993 to 2014 using banking sector and stock market development indicators. Design/methodology/approach To begin with, the study first examined some of the principal indicators of financial development and macroeconomic variables of the selected economies. Next, using generalized method of moment system estimation (SYS-GMM), the relationship between financial development and growth is investigated. The banking sector development indicators used in the study include size of the financial intermediaries, credit to deposit ratio (CDR) and domestic credit to private sector (CPS), whereas the stock market development indicators are value of shares traded and turnover ratio. Also, some macroeconomic control variables such as inflation, exports and the enrolment in secondary education were used. Findings The examination of the principal indicators of financial development and macroeconomic variables have shown considerable differences between the selected economies. Results from the dynamic one-step SYS-GMM estimates confirm that in presence of turnover ratio, all the selected banking development indicators such as size of financial intermediaries, CDR and CPS are positively significantly determining economic growth. Similarly, in presence of all the selected banking sector development indicators, value of shares traded is found to be positively significantly associated with economic growth. However, the same is not true when turnover ratio is regressed in presence of banking sector variables. Overall, the evidence suggests that banking sector development and stock market development indicators are complementary to each other in stimulating economic growth. Practical implications A positive association between financial development and growth indicates that the policymakers should take necessary measures toward simultaneous development of both banking sector as well as stock market for inducing growth. Originality/value The present paper attempts to examine the relationship between financial development and growth using both banking sector and stock market development indicators which has not been attempted before for BRICS. Also, most of the existing studies are found in case of developed economies. This paper tries to fill this void by studying five major emerging economies.

Effect of Effective Management of Donors’ Fund on ICT Sector Development in Rwanda

The main objective of this paper is to assess the effect of effective management of donors’ fund on ICT sectordevelopment in Rwanda.A Purposive sampling have been used to select employees in charge of ICT in higher learning institutions,Broadband Systems Corporation Ltd (BSC Ltd) staff, Rwanda Information Society Authority (RISA) staff ,MINECOFIN projects implementation unit staff and Rwanda Development Board single project implementation unitstaff. In total 24 employees from these institutions contributed to this research through responding elaboratedquestionnaire and by the mean of interview. Purposively six students responded to the questionnaire.The questionnaire and an interview guide were used to collect primary data and were analyzed using StatisticalPackage for Social sciences, descriptive and inferential statistics were adopted as research approach. Qualitative datawas treated through sound content analysis.Results from the research found the following: It has been observed that the total budget of USD 24.M allocated tofinance the Rwandan ICT sector was executed up to 99.54% and all components have been implemented at asatisfactorily rate by both the World Bank and the Government of Rwanda. This high finance performance ratecaused a radical change in ICT Sector development whereby after the project implementation period elapsed, anumber of ICT sector development indicators proved a tremendous shift. One of those indicators is mobilesubscriptions and internet subscriptions that increased 217 % and 1,000% respectively. The cost of internationalinternet connectivity got an up-down shift from $10,000 in 2008 up to $125 in 2014. Both physical and financialproject implementation indicators evidenced the close relationship or the causality of ICT sector development givenan effective funds management. Finally, the Pearson coefficient of 0.814** that was obtained from testing bothvariables of this study resulted in positive high correlation between donors’ funds management and the ICT sectordevelopment.

Revisiting the finance-inequality nexus in a panel of African countries

The study assesses the role of financial development on income inequality in a panel of 48 African countries for the period 1996–2014. Financial development is defined in terms of depth (money supply and liquid liabilities), efficiency (from banking and financial system perspectives), activity (at banking and financial system levels) and stability while, three indicators of inequality are used, namely, the: Gini coefficient, Atkinson index and Palma ratio. The empirical evidence is based on Generalised Method of Moments. When financial sector development indicators are used exclusively as strictly exogenous variables in the identification process, it is broadly established that with the exception of financial stability, access to credit (or financial activity) and intermediation efficiency have favourable income redistributive effects. The findings are robust to the: control for unobserved heterogeneity in terms of time effects and inclusion of time invariant variables as strictly exogenous variables in the identification process. The findings are also robust to the Kuznets hypothesis: an inverted humped shaped nexus between increasing GDP per capita and inequality. Policy implications are discussed.

Impact of financial development on economic growth: Empirical analysis of India

The main objective of this paper is to study the impact of India's financial developments on its economic growth for the period 1989 to 2011. The Indian financial development is reflected by developments in stock market and banking sector. The paper aims to study the impact of both financial sectors independently as well as combined impact. The stock market development indicators and banking sector development indicators along with macro-economic reform indicators and control variables are regressed over economy's growth rate. Developments in Indian stock market have a weak and bi-directional relationship with the nation's economic growth. The stock market development measures are highly correlated with the banking sector development indicators leading to a problem of multi-collinearity in the regression model.

WAITING FOR THE CAPITAL MARKET UNION: THE POSITION OF LATVIAN CORPORATE BOND MARKET

Baltic region is traditionally treated as similar and comparable when analysed on the macroeconomic level. The major difference is faced when the analysis is performed for the corporate bond market – the weight of Latvian publically traded corporate bonds among the three countries- Latvia, Lithuania and Estonia- reached 94% by the number of issues quoted. With 47 corporate bonds listed in Nasdaq Riga, Latvian corporate bond market demonstrated the rapid growth and recognition of corporate bonds as the source of alternative to bank lending financing method (Nasdaq Baltic, 2017). There are no obvious macro or microeconomic evidence for Latvia meeting more favourable conditions for corporate bond market development than Lithuania and Estonia The increasing role of the capital market as the alternative to the traditional to Europe banking sector is strongly supported by the European Commission (EC). In 2015 the EC announced the Capital Market Union (CMU) initiative and respective action plan as the reaction to the challenges faced by both banking sector and small and medium enterprise (SME) segment in Europe. As integrated and more diverse capital markets will decrease the cost of funding for companies, the objective of the CMU is to make the financial system more resilient in all 28 Member States including Latvia, Lithuania and Estonia (European Commission, 2017). While several steps like proposal to modernise the Prospectus Directive have been made, further actions based on the review of regulatory barriers to SME admission on public markets and SME growth markets and review of European Union corporate bond markets, focusing on how market liquidity can be improved made in 2017 will follow (European Commission, 2015). The aim of this article is to analyse the level of development of the biggest Baltic corporate bond market- Latvian corporate bond segment and to reveal the potential CMU introduction effect. The paper applies Financial Sector Development Indicators (FSDI) framework developed by The World Bank (World Bank, 2004) to the country cluster as defined by Bending et al (2014). The paper relates the results to CMU action plan developed by the European Commission. The article estimates that Latvian corporate bond market is highly developed compared to the peers selected where the only lagging area is size. The article concludes that reviving securitisation, participation in European Long Term Investment Funds and developing European private placement market should be prioritised for Latvia within CMU framework.DOI: http://dx.doi.org/10.5755/j01.eis.0.11.18147

Economic-Mathematical Model and Mathematical Methods for Substantiating the Choice of the Company Innovation Strategy

Objectives: The study considers mathematical methods applied to strategic management. The objective of this study is to develop economic-mathematical model to justify the innovation strategy selected by a company. Methods: Based on the suggested economic-mathematical model, the study develops a decision-making methodology for selecting the innovation strategy of a company. In the course of modeling, an innovation strategy is presented as an aggregate that consists of two-element formations that include the name of the strategy and the certainty factors that determine the degree of reliability of the selected strategy. Findings: Depending on the type of the company (production focused or scientific and innovative type), innovation strategies can be split into two sub-aggregates. In each of those sub-sets, innovation strategies are ranked based on their degree of aggressiveness. The choice of the innovation strategy is founded on the production rules of fuzzy logic, where the parameters are represented by the type of the organization and by the primary metrics of the innovation strategy components. Innovation strategy is decomposed into elementary indicators in such a way that the components of the company’s innovative potential are represented by the investment, scientific and resource potentials. In turn, such categories as administrative, financial, company geopolitical and foreign economic risks are regarded as probable strategic risks of the innovative development. Economic conditions of the company are predetermined by the industry sector development indicators and by the investment attractiveness of the host region. It has been proved that the informed decisions on innovation strategy can be made relying on formalized expertise and on precision of fuzzy algorithms. Applications/Improvements: Suggested methods could be implemented employing the relevant software. The study aims to help businesses operate under the conditions of high risks and uncertainties related to the available information.

Causality between FDI and Financial Market Development: Evidence from Emerging Markets

This paper studies the causal relationship between foreign direct investment (FDI) and financial market development (FMD) using panel data from emerging markets. Most studies of the relationship between FDI and FMD have focused on the role of FMD in the link between FDI and economic growth, with no deep understanding of direct causality between FDI and FMD, especially in emerging markets, where financial markets are in the development stage. We document bidirectional causality between FDI and stock market development indicators. For banking sector development indicators, the relationship is ambiguous and inconclusive. Care is therefore needed when analysing the relationship between FMD and FDI, as results may depend on whether the FMD variables used to evaluate causality are stock market or banking sector development indicators.

Banking Sector Development and Economic Growth in India

This article investigates short-run as well as long-run relationships, and also causality relationships between banking sector development and the economic growth of India for which empirical analysis is performed using annual data. We use a new data set of banking sector development indicators to argue that banking sector development substantially affected economic growth. We find strong evidence that banking sector development caused economic growth in the Indian economy, especially in the period between 1960 and 2011, covering 52 years of the post-independence period for India.

Banking development and energy consumption: Evidence from a panel of Middle Eastern countries

Since the late 1990s, much scholarly work has been done in the field of energy economics on the nexus between economic growth and energy consumption. Over the last decade, however, the literature has been recompiled through examining the relationship between energy consumption and a set of variables by referring to the implicit role of economic growth. Based upon finance-energy nexus, this paper attempts to investigate the linkage between the banking development and energy consumption for a panel of seven Middle Eastern countries using panel cointegration and causality techniques over the period 1980–2011. Panel cointegration results show a long-run relationship between energy consumption, income, energy prices and banking sector development indicators. FMOLS (Fully Modified OLS) results reveal that all banking sector indicators affect energy demand positively in the long-run and the impact range falls between 0.169 and 0.396. In terms of causality, there is evidence of a one way short-run relationship from banking expansion to energy consumption while long-run dynamics indicate a bi-directional feedback relationship. These results have some implications for energy and environmental policy. One main implication is that energy conservation policies may be implemented with little or no adverse impact on financial development in the short-run whereas they might become detrimental in the long-run.