Model of Financial Development: A cluster analysis

2011

This paper analyzes the bright and dark sides of the financial development process through the lenses of the four fundamental frictions to which agents are exposedinformation asymmetry, enforcement, collective action, and collective cognition. Financial development is shaped by the efforts of market participants to grind down or circumvent these frictions, a process further spurred by financial innovation and scale and network effects. The analysis leads to broad predictions regarding the sequencing and convexity of the dynamic paths for a battery of financial development indicators. The method This paper is a product of the Chief Economist Office for Latin America and the Caribbean Region. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted at [email protected], [email protected], and [email protected]. used also yields a robust way to benchmark the financial development paths followed by individual countries or regions. The paper explores the reasons for path deviations and gaps relative to the benchmark. Demandrelated effects (past output growth), financial crashes, and supply-related effects (the quality of the enabling environment) all play an important role. Informational frictions are easier to overcome than contractual frictions, not least because of the transferability of financial innovation across borders.

Journal of International Financial Markets, Institutions and Money, 2016

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2011

The positive effects of financial development on economic growth have encouraged researchers to study the determinants of financial development. Based on the theoretical and empirical studies undertaken, institutions, openness of trade and financial markets, legal tradition, and political economy are identified as factors promoting the financial system. Of these, political economy factors, which can have both direct and indirect effects through other determinants, could be considered the most influential factors in financial development. Variations in the political economy of countries could well explain variations in their financial development. Although all studies show the significant effects of these determinants on financial development, further research is needed to assess the impact of each determinant and the policies that could best promote financial development.

In this paper, we investigate the relationship between financial development and economic growth in the emerging economies. We explore the effects of financial liberalization and the impact of financial development on economic growth in the emerging economies. Financial liberalization creates market-based incentives that promote economic growth, (Davies, 2010). The financial development measures and analyses the factors enabling the growth of financial systems in a number of economies around the globe. It could be intended at providing a comprehensive means to scale their financial systems and establish priorities for improvement. A thoroughly researched the subject in economics is the relationship between financial development and economic growth, (Kohli, 2008). According to these discussions, the nature of casualty between the two was established. On the other hand, there is a very common view that financial development is significant and provides to economic growth popularly known as supply lending activity. Equally, there is an order following the belief which states that economic growth stimulates the progress of the financial sector. In addition, researchers state that a pointer association exists between financial development and economic growth. Due to the argument surrounding the link between the two, a group of researchers has subjected the financial growth link to experimental proof. However, despite their efforts, a gap remains in the literature. These results from the fact that very few studies have given attention to the stage development theory, developed by Patrick in nineteen sixty six, where the direction of casualty between the two variables changes over the course of development. The scarcity of experimental studies on Patrick’s theory may be due to limitation of information (Kohli, 2008).

The World Bank Economic Review, 2013

International Journal of Social Science and Economic Research, 2020

This research aims to analyse the impact of financial system's development and stability on economic growth. There is enough economic literature which defines well-functioning of financial system which helps to gain economic efficiency, investment and growth. It also ventures to study the relationship between the financial development and growth regarding to Indian economy. The following study findings are put to the test: 1. The dependency between financial system and rise in economy. 2. Having large financial system does not mean to rise in economy and GDP of country. This paper also emphasis on financial deepening of markets in India and other Asia pacific wealth which is generally consider as a critical enabler of economic development. The vast structure of financial system and deepening of financial system gave more access to productive investment to occur. Financial intermediation plays a vital role to improve efficiency and reaching higher real growth in country's wealth. Increase in diversification of financial system with a mixture of small-and large-scale institutions and combination of bank and non-financial institutions will be better suited to real economic needs. However, there are many challenges faced by financial sector in form of Non-Performing Assets (NPAs) of the financial institutions i.e. banks and under developed corporate bond markets. These challenges require some attention and policy amendments.

This paper describes our construction of the Global Financial Development Database and uses the data to compare financial systems around the world. The database provides information on financial systems in 205 economies over the period from 1960 to 2010 and includes measures of (1) size of financial institutions and markets (financial depth), (2) degree to which individuals and firms can and do use financial services (access), (3) efficiency of financial intermediaries and markets in intermediating resources and facilitating financial transactions (efficiency), and (4) stability of financial institutions and markets (stability).

2013

The interplay between the development of financial markets and economic growth is either undermined or considered to be debilitating for the economic performance after the recent global credit crisis. Such economic situations may arise due to the asymmetry of the relation between financial markets and the economic activity as a whole. This study investigates the relation between financial development and economic growth from the asymmetry perspective within the emerging European economies. Financial development is measured with two different indicators to capture the different dimensions of the financial system. The results show the direction of causality depends on the indicators that are opted to represent the financial development. Furthermore, the relation between financial development and economic growth exhibits differences among emerging European economies despite these economies has similar structural features. Finally, causal relation is more prominent from the direction of negative economic growth shocks to negative financial development.

Economic Development and Financial Structures, 2004

The aim of this brief work is to examine the relationship between economic development and financial structures, trying to understand if financial systems could have a positive, neutral or negative function for the economic growth. At last, we underline the importance of the new “Basel Capital Accord” for the future safety both of the financial system and the real economy.

This paper discusses the emergence of financial structures and the three alternative ways in which the role of the financial structure helps in economic development. The three alternative views are: first, the primitive view by John G. Gurley and E. S. Shaw. Second, the functional approach by Ross Levine. The last one is the historical perspective by Alexander Gerschenkron. The three views are followed by the conclusion.