Financial development and poverty reduction: panel data analysis of South Asian countries

2016 ◽  
Vol 43 (4) ◽  
pp. 400-416 ◽  
Author(s):  
Madhu Sehrawat ◽  
A K Giri
Keyword(s):  
Panel Data ◽  
Financial Development ◽  
South Asian ◽  
Poverty Reduction ◽  
Causality Test ◽  
Panel Causality ◽  
Content Type ◽  
Long Run ◽  
Integration Test ◽  
Asian Economies

Purpose – The purpose of this paper is to examine the contribution of financial development to poverty reduction in 11 South Asian developing countries using panel data set over the time period 1990-2012. Design/methodology/approach – The stationarity properties are checked by using Levin-Lin-Chu and Im-Pesaran-Shin panel unit root tests. The paper applied the Pedroni’s panel co-integration test to examine the existence of long-run relationship. The coefficients of co-integration are examined by fully modified OLS (FMOLS) and the causal link is checked by panel causality test. Findings – The empirical results of Pedroni co-integration test confirm a long-run relationship between financial development and poverty reduction in South Asian developing economies. The findings of FMOLS method confirm a strong and positive relationship between financial development, trade openness, inflation and poverty reduction. Results of panel causality test indicate that there is a unidirectional causality running from financial development to poverty reduction variable. Research limitations/implications – The present study recommends appropriate economic and financial reforms focussing on financial inclusion to reduce poverty in selected South Asian economies. Originality/value – This paper is the first of its kind to empirically examine the causal relationship between financial sector development and poverty reduction in South Asian economies using modern econometric techniques.

Financial development and poverty reduction in India: an empirical investigation

2016 ◽  
Vol 43 (2) ◽  
pp. 106-122 ◽  
Author(s):  
Madhu Sehrawat ◽  
A K Giri
Keyword(s):  
Financial Development ◽  
Poverty Reduction ◽  
Financial Sector ◽  
Annual Data ◽  
Causality Test ◽  
Content Type ◽  
Financial Sector Development ◽  
Long Run ◽  
Integration Test ◽  
Short Run

Purpose – The purpose of this paper is to examine the relationship between financial sector development and poverty reduction in India using annual data from 1970 to 2012. The paper attempts to answer the critical question: does financial sector development lead to poverty reduction? Design/methodology/approach – Stationarity properties of the series are checked by using Ng-Perron unit root test. The paper uses the Auto Regressive Distributed Lag (ARDL) bound testing approach to co-integration to examine the existence of long-run relationship; error-correction mechanism for the short-run dynamics and Granger non-causality test to test the direction of causality. Findings – The co-integration test confirms a long-run relationship between financial development and poverty reduction for India. The ARDL test results suggest that financial development and economic growth reduces poverty in both long run and short run. The causality test confirms that there is a positive and unidirectional causality running from financial development to poverty reduction. Research limitations/implications – This study implies that poverty in India can be reduced by financial inclusion and financial accessibility to the poor. For a fast growing economy with respect to financial sector development this may have far-reaching implication toward inclusive growth. Originality/value – This paper is the first of its kind to empirically examine the causal relationship between financial sector development and poverty reduction in India using modern econometric techniques.

Do market size and financial development indicators affect human capital of select south Asian economies?

2019 ◽  
Vol 46 (7) ◽  
pp. 887-903 ◽  
Author(s):  
Narayan Sethi ◽  
Bikash Ranjan Mishra ◽  
Padmaja Bhujabal
Keyword(s):  
Growth Rate ◽  
Human Capital ◽  
Financial Development ◽  
South Asian ◽  
Market Size ◽  
Content Type ◽  
Development Indicators ◽  
Long Run ◽  
Asian Economies ◽  
The Impact

Purpose The purpose of this paper is to empirically investigate whether market size and its growth rate, along with financial development indicators, affect human capital in selected south Asian economies over the time period from 1984 to 2015. Design/methodology/approach The stationarity of the variables are checked by LLC, IPS, ADF and Phillips–Perron panel unit-root tests. Pedroni’s and Kao’s panel co-integration approaches are employed to examine the long-run relationship among the variables. To estimate the coefficients of co-integrating vectors, both PDOLS and FMOLS techniques are used. The short-term and long-run causalities are examined by panel granger causality. Findings From the empirical results, the authors found that both the market size and financial development play an important role in the development of human capital in the selected south Asian economies. It is evident that a large market size and faster degree of financial development in the selected countries result in better human capital formation. Originality/value There are a number of studies on the impact of financial development indicators on human capital and economic growth, but there is hardly any study that considers market size and its growth rate along with financial development indicators with human capital in the context of south Asian economies. The study fills this research gap.

Do Globalization and Institutional Reforms Matter for Financial Structure in Selected Asian Countries? A Panel Data Approach

2019 ◽  
Vol 65 (2) ◽  
pp. 87-100
Author(s):  
Madhu Sehrawat ◽  
A. K. Giri
Keyword(s):  
Panel Data ◽  
Financial Development ◽  
Ordinary Least Squares ◽  
Institutional Reforms ◽  
Panel Causality ◽  
Dynamic Relationship ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Integration Test ◽  
Dynamic Ols

Abstract This present study aims to examine the dynamic relationship between globalization, institutional reforms, and financial development in the context of South Asian economies over the period 1985–2015 by employing panel data methods. The Westerlund (2007) panel co-integration test result indicates that there exists a long-run equilibrium relationship between globalization, institutional reforms, and financial development. The findings of panel dynamic ordinary least squares (PDOLS) indicate that the effect of globalization is positive and statistically significant to financial development. Furthermore, the empirical evidence of a dynamic panel error-correction model reveals a unidirectional causal relationship running from globalization and institutional reform to financial development. In terms of policy recom-mendations, the study suggests that it is vital to focus on globalization and institutional reforms to promote effectiveness of the financial system and economic performance in the region. JEL Classifications: F19, G29 globalization, institutional reforms, South Asia, Panel Dynamic OLS (PDOLS), panel causality

scholarly journals The drivers of economic growth in China and India: globalization or financial development?

2017 ◽  
Vol 16 (1) ◽  
pp. 54-84 ◽  
Author(s):  
Magda Kandil ◽  
Muhammad Shahbaz ◽  
Mantu Kumar Mahalik ◽  
Duc Khuong Nguyen
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Emerging Market ◽  
Annual Data ◽  
Test Results ◽  
Causality Test ◽  
Content Type ◽  
China And India ◽  
Integration Test ◽  
The Impact

Purpose Using annual data from 1970 to 2013 for China and India, this paper aims to examine the impact of globalization and financial development on economic growth by endogenizing capital and inflation and drawing comparisons between the two fastest growing emerging market economies. Design/methodology/approach In the long run, co-integration test results indicate that financial development increases economic growth in China and India. Findings The results also reveal that globalization accelerates economic growth in India but, surprisingly, impairs economic growth in China, as it increases competition for exports. The results furthermore disclose that acceleration in capitalization and inflation, as a proxy for aggregate demand, are positively linked to economic growth in China and India. Originality/value Causality test results indicate that both financial development and economic growth are interdependent. In contrast, causality runs from higher economic growth to increased globalization in India, while the results do not support long-term causality between globalization and economic growth in China.

The relationship between financial development and economic growth in Eswatini (formerly Swaziland)

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Siphe-okuhle Fakudze ◽  
Asrat Tsegaye ◽  
Kin Sibanda
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Development ◽  
Granger Causality Test ◽  
Causality Test ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
The Relationship

PurposeThe paper examined the relationship between financial development and economic growth for the period 1996 to 2018 in Eswatini.Design/methodology/approachThe Autoregressive Distributed Lag bounds test (ARDL) was employed to determine the long-run and short-run dynamics of the link between the variables of interest. The Granger causality test was also performed to establish the direction of causality between financial development and economic growth.FindingsThe ARDL results revealed that there is a long-run relationship between financial development and economic growth. The Granger causality test revealed bidirectional causality between money supply and economic growth, and unidirectional causality running from economic growth to financial development. The results highlight that economic growth exerts a positive and significant influence on financial development, validating the demand following hypothesis in Eswatini.Practical implicationsPolicymakers should formulate policies that aims to engineer more economic growth. The policies should strike a balance between deploying funds necessary to stimulate investment and enhancing productivity in order to enliven economic growth in Eswatini.Originality/valueThe study investigates the finance-growth linkage using time series analysis. It determines the long-run and short-run dynamics of this relationship and examines the Granger causality outcomes.

scholarly journals Foreign Direct Investment, Financial Development and Economic Growth Evidence from Saudi Arabia

2017 ◽  
Vol 8 (4) ◽  
pp. 228 ◽  
Author(s):  
Najeeb Muhammad Nasir ◽  
Mohammed Ziaur Rehman ◽  
Nasir Ali
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Financial Development ◽  
Direct Investment ◽  
Impulse Response Function ◽  
Saudi Arabian ◽  
Causality Test ◽  
Long Run ◽  
Oil Resources ◽  
Integration Test

This study is an effort to explain and establish a relationship among foreign direct investment, financial development and economic growth in Saudi Arabian context for the period of 1970 to 2015 by employing Vector Auto Regression (VAR) and modified Granger Casualty Models. The result of Johansen co-integration test illustrates that no long run co-integration can be established among the variables. VAR has established a link between economic growth, financial development and foreign direct investment. The Granger causality test also confirms that economic growth causes foreign direct investment and financial development which is a unidirectional causality running from economic growth towards foreign direct investment and financial development. No significant causality can be observed empirically between foreign direct investment and financial development. This feature can be attributed to the fact that Saudi Arabian economy is still heavily dependent on its oil resources which is the driving force behind growth. Impulse Response Function has been utilized in order to observe the response to the shocks among the variables.

Exports, financial development and economic growth in Pakistan

2014 ◽  
Vol 13 (2) ◽  
pp. 155-170 ◽  
Author(s):  
Muhammad Shahbaz ◽  
Mohammad Mafizur Rahman
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Financial Development ◽  
Error Correction Model ◽  
Causality Analysis ◽  
Bounds Testing ◽  
Causality Test ◽  
Correction Model ◽  
Content Type ◽  
Long Run

Purpose – This paper aims to explore the relationship between exports, financial development and economic growth in case of Pakistan. Design/methodology/approach – The autoregressive distributed lag bounds testing approach to cointegration and error correction model are applied to test the long-run and short-run relationships, respectively. The direction of causality between the variables is investigated by the vector error correction model Granger causality test and robustness of causality analysis is tested by applying innovative accounting approach. Findings – The analysis confirms cointegration for the long-run relation between exports, economic growth and financial development in case of Pakistan. The results indicate that economic growth and financial development spur exports growth in Pakistan. The causality analysis reveals feedback hypothesis that exists between financial development and economic growth, financial development and exports, and, exports and economic growth. Originality/value – This study provides new insights for policy makers to sustain exports growth by stimulating economic growth and developing financial sector in Pakistan.

Dynamic linkages among international crude oil, exchange rate and Norwegian stock market: evidence from ARDL bound testing approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shelly Singhal ◽  
Sangita Choudhary ◽  
Pratap Chandra Biswal
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Crude Oil ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Oil Price ◽  
Causality Test ◽  
Content Type ◽  
Long Run ◽  
Integration Test

Purpose The purpose of this paper is to examine the long-run association and short-run causality among oil price, exchange rate and stock market in Norwegian context. Design/methodology/approach This work uses auto regressive distributed lag (ARDL) bound co-integration test to examine the long-run association among international crude oil, exchange rate and Norwegian stock market. Further to test the causality, Toda–Yamamoto Granger causality test is used. Daily data ranging from 1 January, 2011 to 31 December, 2018 is used in this study. Findings Findings of this study suggest the existence of long-run equilibrium relationship among oil price, exchange rate and Norwegian stock market when oil price is taken as dependent variable. Further, this study observes the bi-directional causality between Norwegian stock market and exchange rate and unidirectional causality between oil and Norwegian stock market (from oil to stock market). Originality/value To the best of the authors’ knowledge, this the first study in context of Norway to explore the long-run association and causal relationships among international crude oil price, exchange rate and stock market index. Particularly, association of exchange rate and stock market largely remains unexplored for Norwegian economy. Further, majority of studies conducted in Norwegian setup have considered the period up to year 2010 and association of these variables is found to be time varying. Finally, this study uses ARDL bound co-integration test and Toda–Yamamoto Granger causality test. These methodologies have been used in literature in context of other countries like India and Mexico but not yet applied to study the Norwegian case.

Does financial development matter for domestic investment? Empirical evidence from India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Niharika Sinha ◽  
Swati Shastri
Keyword(s):  
Financial Development ◽  
Principal Component ◽  
Domestic Investment ◽  
Bounds Testing ◽  
Causality Test ◽  
Content Type ◽  
Development Indicators ◽  
Indian Economy ◽  
Long Run ◽  
The Impact

PurposeThis paper empirically examines the impact of financial development on domestic investment in India for the period 1989–2017.Design/methodology/approachThis study employs the autoregressive distributed lag (ARDL) bounds testing approach to co-integration to test the long-run relationship between financial development and domestic investment. To test the direction of causality, Toda–Yamamoto causality test and vector error correction model (VECM) Granger causality/Block Exogeneity Wald test have been employed. Investment has been measured by Gross Capital Formation. To capture various aspects of financial development in India, eight alternative indicators (both bank based and market based) have been used. With the help selected indicators, a composite index (FINDEX) of financial development has been constructed using principal component analysis (PCA).FindingsThe estimated result finds evidence in favour of positive, short-run and long-run impact of financial development on investment in the Indian economy. Both bank-based and market-based indicators are found to significantly affect the level of investment. The significant effect of efficiency-based financial development indicators (both bank based and market based) upon domestic investment implies that there is a need to implement policies that ensure the efficiency of financial intermediation.Originality/valueTo the best of authors' knowledge, not much research has been done to explore the relationship between financial development and domestic investment, especially in the case of Indian economy. This study also tries to find the impact of bank-based and market-based financial development indicators upon domestic investment to explore banks vs market issue.

Investigating the interlinkages between infrastructure development, poverty and rural–urban income inequality

2017 ◽  
Vol 34 (4) ◽  
pp. 466-484 ◽  
Author(s):  
Varun Chotia ◽  
N.V.M. Rao
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Poverty Reduction ◽  
Ordinary Least Squares ◽  
Infrastructure Development ◽  
Content Type ◽  
Long Run ◽  
Integration Test ◽  
Urban Income ◽  
The Relationship

Purpose The purpose of this paper is to investigate the relationship between infrastructure development, rural–urban income inequality and poverty for BRICS economies. Design/methodology/approach Pedroni’s panel co-integration test and panel dynamic ordinary least squares (PDOLS) have been used to carry out the analysis. Findings The empirical findings confirm a long-run relationship among infrastructure development, poverty and rural–urban inequality. The PDOLS results suggest that both infrastructure development and economic growth lead to poverty reduction in BRICS. However, rural–urban income inequality aggravates poverty in these nations. The paper advocates for adopting policies aimed at strengthening infrastructure and achieving economic growth to reduce the current levels of poverty prevailing in the BRICS nations. Originality/value Significant limitations exist in the literature in terms of not clearly defining the nature of relationship and interlinkages between infrastructure development, poverty and inequality, with regard to the BRICS nations. The available studies mainly focus on the relationship between infrastructure and growth, with the universal agreement being that these two are positively related. However, it is still not right to assume that economic growth attributable to infrastructure development will, therefore, subsequently lead to a reduction in inequality. This forms the basis for this study, that is, to critically examine the relationship between infrastructure development, inequality and poverty for BRICS nations.

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