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on Financial Development and Growth |
| By: | Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus, Turkey; Department of Economics, University of Pretoria, Pretoria, South Africa and Montpellier Business School, Montpellier, France); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Chien-Chiang Lee (Department of Finance, National Sun Yat-sen University, Kaohsiung, Taiwan); Godwin Olasehinde-Williams (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus, Turkey) |
| Abstract: | It is widely understood that the insurance and banking sectors of every economy perform some functions in driving economic growth. What is not yet well documented is whether their roles are complimentary or substitutive. With the aid of the dynamic panel-GMM estimation technique, this paper evaluates the synergistic effect of both sectors on economic growth in a panel of 11 African countries that are responsible for most of the activities in the continent’s financial sector. The insurance-banking-growth nexus was also examined through panel causality tests. The results show that life insurance market and the banking sector are complimentary and that the non-life insurance market and the banking sector are also complimentary. We find that overall, the relationship between the insurance and banking sectors in Africa is a complimentary one and that their synergistic impact on economic growth is positive. The feedback hypothesis was also confirmed in the relationship between the insurance sector and economic growth and between the banking sector and economic growth. |
| Keywords: | Synergistic effect, Insurance market, Banking sector, Africa, Dynamic GMM, Panel Granger causality |
| JEL: | C33 G21 G22 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201818&r=fdg |
| By: | YOUNSI, Moheddine; BECHTINI, Marwa |
| Abstract: | The purpose of this paper is to examine the causal relationship between economic growth, financial development and income inequality for the BRICS countries, namely; Brazil, Russia, India, China, and South Africa, using annual panel data covering the period 1995-2015. We construct a composite financial sector development index for these countries by applying the principal component method on the main four proxies of financial development, that is, domestic credit to private sector to GDP ratio, domestic credit given by banks sector to GDP ratio, M2/GDP, and stock market capitalization to GDP ratio. Results of Pedroni panel cointegration and Kao residual panel cointegration tests confirm the valid long-run cointegration relationship between the considered variables. Fixed effects estimation results show that GDP per capita growth has a positive and significant effect on income inequality, while the coefficient of its squared term has negative and significant effect on income inequality. Similarly, financial development index appears to have a positive and statistically significant effect on income inequality, while its squared term has negative and statistically significant effect on income inequality. Our empirical findings support the financial Kuznets hypothesis of an inverted U-shaped relationship between economic growth, financial sector development and inequality in the BRICS countries over the study period. Our results are robust by employing POLS and GMM estimators. Results of Granger causality test shown that there is a unidirectional causality running from financial development index to income inequality, but a bidirectional causality between inflation and income inequality is found. However, there is no causal relationship between income inequality and economic growth. These findings are expected to help policymakers to reduce inequality in these countries through the improvement of taxation policies financial system. |
| Keywords: | Economic growth, financial development, income inequality, financial Kuznets hypothesis, BRICS countries. |
| JEL: | D63 G20 O11 |
| Date: | 2018–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:85182&r=fdg |
| By: | Jakhongir Kakhkharov; Alexandr Akimov |
| Keywords: | Financial institutions, financial development, transition economies |
| JEL: | G28 O16 G21 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:gri:fpaper:finance:201801&r=fdg |
| By: | Xi Li (Department of Accounting , The Hong Kong University of Science and Technology); Yikai Wang (Department of Economics , University of Oslo, Norway); Tong Zhang (Department of Economics, University of Zurich, Switzerland) |
| Abstract: | In this paper, we study how the financial market frictions in the Chinese economy, especially the interest rate policies, lead to inefficient resource allocations and economic imbalances. First, the repressed low interest rate for household savings induce them to increase saving in order to prepare for future necessary expenditures. Consequently consumption share is low and the economic imbalance of consumption and saving emerges. Second, the government provides explicit or implicit guarantees for state firms, so banks prefer to lend to state firms which are less productive. Private firms get less financial resource and operate at sub-optimal levels. The lower aggregate productivity implies the lower household income and consumption and worsen the imbalance. Due to the financial market frictions, traditional consumption stimulating policies, e.g., reducing the interest rate, may actually results in the opposite: even lower consumption and a more imbalanced economy. Reforms towards market-determined interest rates can help to rebalance the economy. |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:hku:wpaper:201853&r=fdg |
| By: | International Monetary Fund; World Bank |
| Keywords: | Finance and Financial Sector Development - Financial Crisis Management & Restructuring Finance and Financial Sector Development - Financial Regulation & Supervision Finance and Financial Sector Development - Financial Structures Finance and Financial Sector Development - Insurance & Risk Mitigation Governance - Governance and the Financial Sector |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:28391&r=fdg |
| By: | Wilfried A. KOUAMÉ (World Bank Group); Sampawende J.-A. TAPSOBA (International Monetary Fund (IMF)) |
| Abstract: | This paper assesses the effects of structural reforms on firm-level productivity for 37 developing countries from 2006 to 2014 period. It takes advantage of the IMF Monitoring of Fund Arrangements dataset for reform indexes and the World Bank Enterprise Surveys for firm-level productivity. The paper highlights the following results. Structural reforms such as financial, fiscal, real sector, and trade reforms, significantly improve firm-level productivity. Interestingly, real sector reforms have the most sizeable effects on firm-level productivity. The relationship between structural reforms and firm-level productivity is nonlinear and shaped by some firms’ characteristics such as the financial access, the distortionary environment, and the size of firms. The pace of structural reforms matters since being a “strong reformer” is associated with a clear productivity dividend for firms. Finally, except for financial and trade reforms, all structural reforms under consideration are bilaterally complementary in improving firm-level productivity. These findings are robust to several sensitivity checks including alternatives methodology and measure of productivity, and a counterfactual experiment based on unsuccessful reforms. |
| Keywords: | Structural Reforms, Firm-level productivity, Developing countries |
| JEL: | D22 O16 O23 O24 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:fdi:wpaper:4214&r=fdg |