Jun 27, 2003 by measuring financial sector development at the beginning of the period, in 1960, king and levine try to mitigate concerns about possible reverse causation between financial development and economic growth. To strengthen financial stability and build countries capacity for crisis management, wbg works with governments and the private sector. Growth with equity is the foremost objective in all economies in the world today, in the especially emerging market economies emes, where the poor still make up portion of the a sizeable pro population. The effect of the financial sector development on growth. Empirical research on the impact of financial markets on the economy can be traced back at least to schumpeter 1911 who emphasized the positive role of financial markets development on economic growth. Banking sector development, real sector, economic growth, nigeria introduction financial intermediation is the process through which financial institutions transfer financial resources from surplus units of the economy to deficit ones. Y represents real gdp per capita growth as an indicator for economic growth. Further, we investigate whether financial inclusion is one of the channels through which mobile phone development influences economic growth. Therefore, the development and the sophistication of the financial sector has gradually become very important for any nation interested in sustainable growth. Financial development and economic growth in developing. Further, there were questions over whether financial. Dependence on the oil sector by the nigerian government has generated a question about economic sustainability. Impact of banking sector development on economic growth.
The vector error correction model was used, in cameroon a longrun relationship between economic growth and financial development was. First, the results suggest that stock market development has a significant effect on economic growth, and this effect remains strong even after the influence of banking sector and other control variables using a growth model. The impact of banking sector development on economic. However, this evidence does not necessarily prove that financial development causes growth. The impact of financial development on economic growth in. Financial development and economic growth in tanzania. But under different conditions, similar rates of growth can have very different effects on poverty, the employment prospects of the poor and broader indicators of human development. This paper investigates the impact of financial sector development, sophistication and performance on economic growth based on. The impact of financial development on economic growth is not homogeneous across countries, regions and income levels. The impact of banking sector development on economic growth. The study considers a number of measures of financial development that are. Financial sector has always been potential ingredient in bringing growth in an economy, the indirect impact of financial markets and institutions through saving mobilization and credit expansion.
This study is conducted to investigate the relationship among international trade, financial development and economic growth in pakistan. Impact of financial sector development on economic growth. Role of financial system in economic development of a country. There are a number of studies that provide evidence in support of the fact that financial development has a negative impact on economic growth. Financial development and economic growth in a natural. Financial sector regulation and implications for growth.
Financial sector development, economic growth, and poverty. Jul 27, 2012 the purpose of this paper is to provide a theoretical framework that integrates the endogenous growth and functions of financial markets and institutions theory in order to investigate how the financial market and the banking sector develop indicators that affect economic growth in these countries. Our global mandate on financial depth and stability emphasizes the sustained development of financial institutions and markets, and the mitigation of financial crises. This research aims to examine the impact of financial development on economic growth in the context of the mena countries. Financial development and economic growth econstor. In recent years the relationship between financial development and economic growth has become an issue of extensive analysis. Impact of bank lending on economics growth in pakistan. The impact of financial development on economic growth. The role of the financial sector in economic growth noureen adnan a,b a phd student at department of economics, university of surrey, united kingdom b lecturer comsats institute of information technology, islamabad, pakistan abstract in this paper we consider the relationship between financial development and economic. Evidence suggests that further development of the financial sector will have a positive impact on developing asias growth.
Financial development and economic growth in developing asia. This study aims to analyze the impact of the development and stability of the financial sector on economic growth on the basis of the quantitative methods that produce robust results. There is even evidence that the level of financial development is a good predictor of future rates of economic growth, capital accumulation and technological change. This investigation was carried out using three common indicators of financial development broad money, depositgdp and domestic. This paper investigates the impact of financial sector development, sophistication and performance on economic growth based on a panel regression methodology. This investigation is motivated by the epileptic nature of the countrys economic performance inspits of several reforms in the financial.
Jun 10, 2015 this study seeks to verify the shortrun and longrun impact of financial sector development on economic growth and also to verify the gap of financial development that separates cameroon and an emergent country like south africa. Moreover, a long sequence of contemporary empirical studies shows that a variety of financial indicators is strongly and positively associated with economic growth. The paper does not discuss policy implications or related issues, such as how to eliminate barriers to financial sector development. It is therefore proposed that the financial reforms in cameroon should be pushed forward in order to boost the development of the financial sector thus an increase in its role on economic growth. Policy reforms implementation for financial sector development. There is even evidence that the level of financial development is a good predictor of future rates of economic growth, capital accumulation, and technological change. The impact of financial sector development and sophistication. Socioeconomic impact of the 201920 coronavirus pandemic. The role of the financial sector in economic growth.
The question is whether financial development precedes or simply follows economic growth. The adf and pp tests are used to check the order of integration of the variables and johansen cointegration methodology is employed to investigate the long run relationship among these variables. Finance is not even discussed in a collection of essays by the pioneers of development economicsmeier and seers 1984, including three nobel prize winners, and nobel. Pdf this paper analyses the impact of development and efficiency of financial sector on economic growth of a group of selected developing. This investigation was carried out using three common indicators of financial development broad money, depositgdp and. According to hussain 2004 banking system plays an important role in financial sector and accounts for 95% of this sector and demonstrated a positive relationship with economic growth of pakistan. We investigate the effect of financial sector development on the economic growth of nigeria with secondary data covering the period 1981 to 20. Building on a chapter in the april 2016 regional economic outlook for subsaharan africa, this paper provides an uptodate panorama of various facets of financial development and how it has evolved over the past few decades. The drivers of economic growth and development are among the most important issues explored by economic theory.
Pdf for decades, african economies have embarked on financial sector reforms. Pdf financial development, manufacturing sector and. H2 an excessively large size of the financial system. However, the empirical implications of these reforms have. Second, the research findings largely support the view that there is a stable. The economic impact on the video game sector is not expected to be as large as in film or other entertainment sectors as much of the work in video game production can be decentralised and performed remotely, and products distributed digitally to consumers regardless of various national and regional lockdowns on businesses and services. Rousseau and paul wachtel although the finance growth relationship is now firmly entrenched in the empirical literature, we show that it is not as strong in more recent data as it was in the original studies with data for the period from 1960 to 1989. Moreover, cross country, case study, industry and firmlevel analyses document.
This study seeks to contribute to the existing studies by examining the case of nigeria using the. Pdf impact of development and efficiency of financial sector on. The impact of the financial system on economic growth in the. H1 the relationship between financial sector development stability and economic growth is nonlinear. This study examines the relationship between financial sector development and economic growth. A rigorous discussion of financial sector policies, however, would require a long article or book by itself. Introduction the number of empirical studies examining the impact of foreign direct investment fdi and financial sector development on economic growth has been growing ever since the emergence of endogenous growth theory. Economists have also debated on the nature of the growthpoverty nexus.
Despite the overwhelming evidence that financial system development has a positive impact on economic growth in panel 1 and 2, alternative points of views still exist. At a broader level, the literature looks at the impact on gross domestic product gdp growth of i the depth of the financial system, as measured by indicators such. Effect of financial sector development on manufacturing. Cameroon financial sector development on economic growth, cameroon is a country which strives for emergence by 2035 and south africa which is an emergent country, this study would bring out the gap in financial sector development which has to be filled for cameroon to be truly emergent by 2035. The impact of financial sector development on economic growth. Therefore, the study investigates the impact of financial development indicators on the manufacturing. Method and material in order to determine the connection between financial sector development and economic growth an analytical framework that draws on the financegrowth nexus literature will be developed.
The aim of this paper is to study the impact of financial crisis on economic growth and investment. The degradation of economic growth and investment levels may also produce catastrophic sequences on development and social peace in a given country. The impact of financial sector development on economic. The impact of the financial system on economic growth in. Financial development, economic growth, ratio of broad money supply to gdp, interest rate, stock market recapitalization, credit to private sector to gdp. Fdi, financial development, economic growth, panel data methods, asia, oceania 1. Hshinyu liang and alan reichert 2006 tested the casual relationship between financial sector development and economic growth in emerging and developed countries. By measuring financial sector development at the beginning of the period, in 1960, king and levine try to mitigate concerns about possible reverse causation between financial development and economic growth. What is happening to the impact of financial deepening on. Previous research conducted focusing on the latin american region found support for both a negative and a positive impact of financial development on economic growth. Economists have also debated on the nature of the growth poverty nexus. Financial development, productivity, and economic growth.
The relationship between financial markets and economic growth has been a. A general proposition states that the development of the financial sector is expected to have a positive impact on economic growth. This paper aims to present the impact of financial sector on economic growth in kosovo. H2 an excessively large size of the financial system does. Prochniak and wasiak argue, based on a study of 28 eu and 34 oecd economies in the period of 199320, that the relationship between the level of. It starts by building an economic model whereby financial markets do have an impact on the longrun economic growth. The importance of financial sector development for growth and. Pdf financial sector development and economic growth. Pdf impact of financial sector development on economic. The view of robinson 1962 and stiglitz 1994 questioning the role of the financial system in.
This study examines the impact of financial sector reforms on the economic growth and development of nigeria. Rousseau and paul wachtel although the financegrowth relationship is now firmly entrenched in the empirical literature, we show that it is not as strong in more recent data as it was in the original studies with data for the period from 1960 to 1989. Strong economic growth therefore advances human development, which, in turn, promotes economic growth. Resilient, transparent and smoothfunctioning financial systems and capital markets contribute to financial stability, job growth and poverty alleviation. The results show that, in both longrun and shortrun, financial development exerts significant but negative effect on economic growth contrary to our expectations. For decades, african economies have embarked on financial sector reforms.
The importance of financial sector development for growth. The impact of fdi and financial sector development on. This paper investigates the impact of financial development on economic growth using time series data in cameroon. In estimating the impact of ict on economic growth, we use a wide range of ict indicators, including. By employing autoregressive distributed lags ardl approach impact of financial sector on economic growth of tanzania is examined.
Fd represents three alternate proxies for financial development which include the. Mar 30, 2016 this study aims to analyze the impact of the development and stability of the financial sector on economic growth on the basis of the quantitative methods that produce robust results. Apr 20, 2016 levine argues that the preponderance of theoretical reasoning and empirical evidence suggests a positive, firstorder relationship between financial development and economic growth. The relationship among international trade, financial. This study seeks to verify the shortrun and longrun impact of financial sector development on economic growth and also to verify the gap of financial development that separates cameroon and an emergent country like south africa. They contended that there is positive relationship between financial sector development and economic growth. Levine argues that the preponderance of theoretical reasoning and empirical evidence suggests a positive, firstorder relationship between financial development and economic growth. The question is not whether finance is a causal factor for economic development which is true by assumption but how big an impact financial development has on economic development. Financial sector is worldwide considered the core component of the economic growth greenwood, 20. Impact of financial crises on growth and investment. Financial development can raise economic growth by increasing saving, improving assigned efficiency of loanable funds, and promoting capital accumulation. What is happening to the impact of financial deepening on economic growth. The purpose of this paper is to provide a theoretical framework that integrates the endogenous growth and functions of financial markets and institutions theory in order to investigate how the financial market and the banking sector develop indicators that affect economic growth in these countries.
Introduction economists disagree sharply about the role of the. Financial sector has always been potential ingredient in bringing growth in an economy, the indirect impact of financial markets and institutions through saving mobilization and credit expansion is of extraordinary importance. Threshold effects of financial sector development on international. Pdf effect of financial sector development on economic. The world bank group is engaged in three global mandates in the financial sector. However, the empirical implications of these reforms have been divergent. The fourth section deals with the data and methodology, while the fifth one briefly describes the impact of financial policy implementations resulted from empirical estimation and last section concludes. Are state policies concerning financial sector compatible with economic growth.
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