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Financial Development (financial + development)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	82%
Humanities and Social Sciences	14%

Distribution within Business, Economics, Finance and Accounting

General & Introductory Economics	60%
General & Introductory Finance & Investments	25%

Selected Abstracts

FINANCIAL DEVELOPMENT, ECONOMIC EFFICIENCY, AND PRODUCTIVITY GROWTH: EVIDENCE FROM CHINA

THE DEVELOPING ECONOMIES, Issue 1 2006
Sylviane GUILLAUMONT JEANNENEY
O16; O47; R11 Financial development might lead to productivity improvement in developing countries. In the present study, based on the Data Envelopment Analysis approach, we use the Malmquist index to measure China's total factor productivity change and its two components (i.e., efficiency change and technical progress). We find that China has recorded an increase in total factor productivity from 1993 to 2001, and that productivity growth was mostly attributed to technical progress, rather than to improvement in efficiency. Moreover, using panel dataset covering 29 Chinese provinces over the period from 1993 to 2001 and applying the Generalized Method of Moment system estimation, we investigate the impact of financial development on productivity growth in China. Empirical results show that, during this period, financial development has significantly contributed to China's productivity growth, mainly through its favorable effect on efficiency. [source]

FINANCIAL DEVELOPMENT AND PRODUCTIVE EFFICIENCY IN OECD COUNTRIES: AN EXPLORATORY ANALYSIS,

THE MANCHESTER SCHOOL, Issue 4 2006
PHILIP ARESTIS
The recent literature provides evidence for a positive relationship between financial deepening and growth but is quite silent on the exact channels through which it materializes. Theory suggests that production efficiency should be one of those main channels. We attempt to capture this channel by modeling productive efficiency explicitly and constructing efficiency frontiers using data envelopment analysis. We apply this procedure to consider whether financial development creates productive efficiency gains in the industrialized OECD countries. Our results show that financial development contributes to productive efficiency. However, this effect weakens over time during the period under scrutiny. Moreover, we find that the effects of financial deepening on productive efficiency depend on the degree of efficiency already achieved. [source]

Institutions for Financial Development: What are they and where do they come from?

JOURNAL OF ECONOMIC SURVEYS, Issue 1 2006
Leopoldo Fergusson
Abstract., Among the fundamental causes of long-run economic performance, differences in ,institutions' have received considerable attention in recent years. At the same time, a large body of theoretical and empirical work shows that financial development can have a big effect on economic performance. This raises the more fundamental question as to why some countries have developed financial markets while others do not. This paper reviews the theoretical and empirical research on this issue and shows that one of the channels whereby better institutions may have an effect on economic development is through the consolidation of larger and better financial markets. An issue that is left aside in this paper relates to what regulations and policies lead to better functioning capital markets. At some level, one can think of regulations and policies as particular types of institutions. Nonetheless, institutional problems are deeper causes leading to poor economic performance; bad policies might simply be part of the channels through which they influence performance. Thus, addressing the question of what determines the emergence of ,good' institutions , i.e. institutions that promote financial development , seems particularly important. Recent research providing some answers to this question is also reviewed. [source]

The Politics of Financial Development: Evidence from Trade Liberalization

THE JOURNAL OF FINANCE, Issue 3 2008
MATIAS BRAUN
ABSTRACT Incumbents in various industries have different incentives to promote or oppose financial development. Changes in the relative strength of promoter and opponent industries thus result in changes in the political equilibrium level of financial development. We conduct an event study using a sample of 41 countries that liberalized trade during 1970 to 2000, and show that the strengthening of promoter relative to opponent industries resulting from liberalization is a good predictor of subsequent financial development. The benefits of developing the financial system are insufficient for financial development, and rents in particular hands appear to be necessary to achieve it. [source]

Does a Country's Openness to Trade and Capital Accounts Lead to Financial Development?

ASIAN ECONOMIC JOURNAL, Issue 2 2008
Evidence from Malaysia
F19 and G29 This paper examines the role of trade openness and capital account openness in influencing financial development in Malaysia. The empirical findings using the bounds testing approach demonstrate that trade openness and capital account openness are positively significant determinants of financial development. However, there is no empirical support of the hypothesis that the simultaneous opening of both trade and capital accounts is necessary for financial development to take place. The evidence is valid for three banking sector development and two stock market development indicators. [source]

Capital Investment and Earnings: International Evidence

CORPORATE GOVERNANCE, Issue 5 2009
Ahmet Can Inci
ABSTRACT Manuscript Type: Empirical Research Question/Issue: We examine the nature of the dynamic linkage (causality) between earnings and capital investment using firm-level data from around the world to see whether the legal environment, including corporate governance and monitoring mechanisms, and financial development are important in the profitability of capital investment. Research Findings/Insights: Using firms in 40 countries over the period 1988,2004, we find that the causality from earnings to capital investment is positive and strong in almost all countries, irrespective of the type of legal system and the degree of financial development. However, the causality from capital investment to earnings is generally negative for firms in civil law and financially undeveloped countries, while the causality is generally positive in common law and financially developed countries. Therefore, our international cross-country study enables us to find that the legal system and financial development are factors in the determination of the profitability of capital investment. Theoretical/Academic Implications: Our findings imply that internal financing is a significant constraint for capital investment, which provides support for the pecking order theory even for financially developed markets and for the free cash flow theory. Common law and financially developed countries tend to provide better shareholder protection with more efficient corporate governance and better investment decisions. Practitioner/Policy Implications: To encourage managers to make capital investments in value-increasing projects, it is important to further improve a legal environment that includes corporate governance, monitoring, and incentive mechanisms. Financial development that includes effective financial regulatory agencies should be sought. [source]

Financial development and poverty reduction in developing countries

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 2 2002
Hossein Jalilian
Empirical investigation of the link between financial development and economic growth has established that finance exerts a significant and positive influence on growth. This paper extends this line of analysis by examining the contribution that financial development makes to poverty reduction in low-income countries. The results reported support the contention that financial sector development policy can contribute to achieving the goal of poverty reduction in developing countries. Copyright © 2002 John Wiley & Sons, Ltd. [source]

FINANCIAL DEVELOPMENT, ECONOMIC EFFICIENCY, AND PRODUCTIVITY GROWTH: EVIDENCE FROM CHINA

Non-linear finance,growth nexus

THE ECONOMICS OF TRANSITION, Issue 3 2009
A threshold with instrumental variable approach
Financial development; economic growth; instrumental variable; threshold regression Abstract This paper revisits the question of whether the finance,growth nexus varies with the stages of economic development. Using a novel threshold regression with the instrumental variables approach proposed by Caner and Hansen (2004) to the dataset used in Levine et al. (2000) we detect overwhelming evidence in support of a positive linkage between financial development and economic growth, and this positive effect is larger in the low-income countries than in the high-income ones. The data also reveal that financial development tends to have stronger impacts on capital accumulation and productivity growth in the low-income countries than in the high-income ones. The findings are robust to alternative financial development measures and conditioning information sets. [source]

Capital Investment and Earnings: International Evidence

The international monetary system in the last and next 20 years

ECONOMIC POLICY, Issue 47 2006
Barry Eichengreen
SUMMARY The evolution of exchange rate regimes The last two decades have seen far-reaching changes in the structure of the international monetary system. Europe moved from the European Monetary System to the euro. China adopted a dollar peg and then moved to a basket, band and crawl in 2005. Emerging markets passed through a series of crises, leading some to adopt regimes of greater exchange rate flexibility and others to rethink the pace of capital account liberalization. Interpreting these developments is no easy task: some observers conclude that recent trends are confirmation of the ,bipolar view' that intermediate exchange rate arrangements are disappearing, while members of the ,fear of floating school' conclude precisely the opposite. We show that the two views can be reconciled if one distinguishes countries by their stage of economic and financial development. Among the advanced countries, intermediate regimes have essentially disappeared; this supports the bipolar view for the group of countries for which it was first developed. Within this subgroup, the dominant movement has been toward hard pegs, reflecting monetary unification in Europe. While emerging markets have also seen a decline in the prevalence of intermediate arrangements, these regimes still account for more than a third of the relevant subsample. Here the majority of the evacuees have moved to floats rather than fixes, reflecting the absence of EMU-like arrangements in other parts of the world. Among developing countries, the prevalence of intermediate regimes has again declined, but less dramatically. Where these regimes accounted for two-thirds of the developing country subsample in 1990, they account for a bit more than half of that subsample today. As with emerging markets, the majority of those abandoning the middle have moved to floats rather than hard pegs. The gradual nature of these trends does not suggest that intermediate regimes will disappear outside the advanced countries anytime soon. , Barry Eichengreen and Raul Razo-Garcia [source]

Dual Economies and International Total Factor Productivity Differences: Channelling the Impact from Institutions, Trade, and Geography

ECONOMICA, Issue 300 2008
AREENDAM CHANDA
This paper provides a framework that decomposes aggregate total factor productivity (TFP) into a component reflecting relative efficiency across sectors, and another component that reflects the absolute level of efficiency. A development accounting analysis suggests that as much as 85% of the international variation in aggregate TFP can be attributed to variation in relative efficiency across sectors. Estimation results show that recent findings highlighting the importance of strong protection of property rights, financial development and geographical advantage for the level of TFP, can be explained by their impact on relative efficiency. [source]

Interest in Medieval Accounts: Examples from England, 1272,1340

HISTORY, Issue 316 2009
ADRIAN R. BELL
The charging of interest for borrowing money, and the level at which it is charged, is of fundamental importance to the economy. Unfortunately, the study of the interest rates charged in the middle ages has been hampered by the diversity of terms and methods used by historians. This article seeks to establish a standardized methodology to calculate interest rates from historical sources and thereby provide a firmer foundation for comparisons between regions and periods. It should also contribute towards the current historical reassessment of medieval economic and financial development. The article is illustrated with case studies drawn from the credit arrangements of the English kings between 1272 and c.1340, and argues that changes in interest rates reflect, in part, contemporary perceptions of the creditworthiness of the English crown. [source]

Financial development and poverty reduction in developing countries

Does Corporate Transparency Contribute to Efficient Resource Allocation?

JOURNAL OF ACCOUNTING RESEARCH, Issue 4 2009
JERE R. FRANCIS
ABSTRACT This paper examines whether a country's corporate transparency environment, which includes the quality of accounting information, contributes to efficient resource allocation. Based on a cross-country study of 37 manufacturing industries in 37 countries, we provide three pieces of related evidence. First, we find the contemporaneous correlations in industry growth rates across country pairs are higher when there is a greater level of corporate transparency in the country pairs, after controlling for country-level economic and financial development. Second, we find the influence of transparency on these correlations is stronger when country pairs are at similar levels of economic development (GDP). Finally, when we control for the level of transparency explained by a country's institutions in place, we find that residual transparency (unexplained by country-level factors) is associated with industry-specific growth rates. Taken together, the results are consistent with corporate transparency facilitating the allocation of resources across industry sectors. [source]

A SURVEY OF RECENT DEVELOPMENTS IN THE LITERATURE OF FINANCE AND GROWTH

JOURNAL OF ECONOMIC SURVEYS, Issue 3 2008
James B. Ang
Abstract This paper provides a survey of the recent progress in the literature of financial development and economic growth. The survey highlights that most empirical studies focus on either testing the role of financial development in stimulating economic growth or examining the direction of causality between these two variables. Although the positive role of finance on growth has become a stylized fact, there are some methodological reservations about the results from these empirical studies. Several key issues unresolved in the literature are highlighted. The paper also points to several directions for future research. [source]

Institutions for Financial Development: What are they and where do they come from?

Government size and openness revisited: the case of financial globalization

KYKLOS INTERNATIONAL REVIEW OF SOCIAL SCIENCES, Issue 3 2009
Alena Kimakova
SUMMARY The volatility of international capital flows to emerging markets has been well documented. Financial globalization may not in general fulfill its theoretical role as a risk sharing mechanism in financially underdeveloped economies, and hence may provide an impetus for compensating government spending. Comparative studies of the public sector have provided evidence of a robust positive association between government size and openness of the economy to trade flows. This paper extends the existing literature by investigating the relationship between government size and financial openness for 87 developing and developed countries between 1976 and 2003. The analysis reveals a positive relationship between exposure to international capital flows and government size. Furthermore, interacting capital flows with income levels shows that richer open economies tend to have smaller government size. These findings are consistent with the hypothesis that benefits of financial integration, in terms of improved risk-sharing and consumption smoothing, accrue only beyond a certain minimum level of financial development. [source]

Law, Finance, and Politics: The Case of India

LAW & SOCIETY REVIEW, Issue 3 2009
John Armour
The liberalization of India's economy since 1991 has brought with it considerable development of its financial markets and supporting legal institutions. An influential body of economic scholarship asserts that a country's "legal origin",as a civilian or common law jurisdiction,plays an important part in determining the development of its investor protection regulations, and consequently its financial development. An alternative theory claims that the determinants of investor protection are political, rather than legal. We use the case of India to test these theories. We find little support for the idea that India's legal heritage as a common law country has been influential in speeding the path of regulatory reforms and financial development. Rather, we suggest there are complementarities between (1) India's relative success in services and software; (2) the relative strength of its financial markets for outside equity, as opposed to outside debt; and (3) the relative success of stock market regulation, as opposed to reforms of creditor rights. We conclude that political economy explanations have more traction in explaining the case of India than do theories based on "legal origins." [source]

FINANCIAL DEVELOPMENT, ECONOMIC EFFICIENCY, AND PRODUCTIVITY GROWTH: EVIDENCE FROM CHINA

Non-linear finance,growth nexus

Does access to credit improve productivity?

THE ECONOMICS OF TRANSITION, Issue 3 2008
Evidence from Bulgaria
Access to credit; productivity; transition Abstract Although it is widely accepted that financial development is associated with higher growth, the evidence on the channels through which credit affects growth at the microeconomic level is scant. Using data from a cross-section of Bulgarian firms, we estimate the impact of access to credit, as proxied by indicators of whether firms have access to a credit line or overdraft facility, on productivity. To overcome potential omitted variable bias of Ordinary Least Squares (OLS) estimates, we use information on firms' past growth to instrument for access to credit. We find credit to be positively and strongly associated with TFP. These results are robust to a wide range of robustness checks. [source]

The Politics of Financial Development: Evidence from Trade Liberalization

The Limits of Financial Globalization

THE JOURNAL OF FINANCE, Issue 4 2005
RENÉ M. STULZ
ABSTRACT Despite the dramatic reduction in explicit barriers to international investment activity over the last 60 years, the impact of financial globalization has been surprisingly limited. I argue that country attributes are still critical to financial decision-making because of "twin agency problems" that arise because rulers of sovereign states and corporate insiders pursue their own interests at the expense of outside investors. When these twin agency problems are significant, diffuse ownership is inefficient and corporate insiders must co-invest with other investors, retaining substantial equity. The resulting ownership concentration limits economic growth, financial development, and the ability of a country to take advantage of financial globalization. [source]

FINANCIAL DEVELOPMENT AND PRODUCTIVE EFFICIENCY IN OECD COUNTRIES: AN EXPLORATORY ANALYSIS,

The Evolution of the Financial Contract in Economic Development

THE MANCHESTER SCHOOL, Issue 2 2004
Niloy Bose
This paper presents an analysis of the joint determination of real and financial development. The analysis is based on a simple endogenous growth model in which a borrower's risk type is private information. Our innovation is to determine jointly the equilibrium loan contract and the economy's growth path. We show that at a low level of development an economy is likely to experience a large incidence of credit rationing. As capital accumulates, credit rationing may fall as a result of the emergence of a new contract regime in which agents mitigate information friction by making use of available information. This change in behaviour results in a higher capital accumulation path and a higher steady-state capital stock. [source]