Stages Of Financial Development Research Articles

Banking Supervision: Quality and Governance

This paper examines the relationship between the quality of banking supervision and governance of the supervisory agency, based on assessments of the Basel Core Principles and the IMF Code on Transparency in Financial Policies, covering 116 and 53 countries, respectively, with 51 common to both. We find a positive correlation between the transparency of the supervisor and the effectiveness of banking supervision; moreover, better accountability and integrity practices of the banking supervisors are associated with higher independence, which in turn is associated with better compliance with the Basel Core Principles. These results are largely robust to different stages of financial development.

Attachment to a National Money: Evidence on Currency Holding at Different Levels of Development

AbstractMost governments issue and maintain a national money stock. Their reasons for doing so include national identity, deficit finance, and policy independence. Against this background, the authors examine agents’ attachment to national currencies as revealed in the pattern of currency holding across countries and over time. The econometric evidence suggests that economic theory can enhance our understanding of these patterns. In a sample of more than 130 countries from 1960 to 1998, the most defensible reduced‐form estimates impute some explanatory power to the various stages of financial development. Along with expected inflation and worldwide financial innovation, this factor provides a partial explanation of currency use around the world. Much variation in currency use across countries over time remains unexplained, however. This suggests that economists’ understanding of the attachment to national currencies is far from complete.

Targeting Child Labor in Debt Bondage: Evidence, Theory, and Policy Implications

Despite recent multilateral efforts to single out child labor in debt bondage as one of the worst forms of child labor, several important questions have yet to be addressed: How pervasive is the phenomenon? Are there systematic correlations between the incidence of children in debt bondage and the economic, legislative, and financial development indicators of the economy? How does an understanding of these correlates affect the way national and international policy measures aimed at targeting this form of child labor are perceived? This article addresses each of these questions. The empirical findings suggest strong correlation between the likelihood of the incidence of child labor in debt bondage with the stage of development of an economy, the stage of financial development, and enforcement of core labor rights. Building on this evidence, the article presents a theoretical model that highlights the drawbacks and merits of a number of policies aimed at putting checks on child labor in debt bondage.

The Great Divide and Beyond: Financial Architecture in Transition

The Great Divide in economic and financial development and the convergence in financial architecture among the successful countries raise fundamental questions about how financial development interacts with economic growth. Is it possible to engineer a development takeoff by creating a modern financial architecture from scratch? Or are financial institutions and markets a reflection of underlying conditions in the real sector? Or are both financial development and economic growth driven by some other underlying variables? Is it possible to leapfrog certain stages of financial development or must all countries go through a phase of bank-oriented financial architecture? The experience of the transition economies represents a unique opportunity to shed new light on these issues.