Financial globalization, institutions and economic growth impact on financial sector development in fragile countries using GMM estimator

Except for emergencies and for technical assistance for raising skills and institution building, foreign aid to Pacific island countries (PICs) for budgetary support has been phased out since the late 1990s. Because of the small sized domestic markets, foreign direct investment (FDI) is small and is confined to development of tourism infrastructure. On the other hand, inward remittances received from the rising number of islanders migrating overseas for work are increasing, far exceeding aid and FDI. However, influence of remittances on economic growth depends on financial sector development (FSD) for mobilizing the savings from the remittance receipts for domestic investment. This paper assesses the role of FSD in the nexus between remittances and economic growth through a panel study of five major PICs, namely Fiji, Samoa, Solomon Islands, Tonga and Vanuatu. The study findings show that the ongoing efforts for strengthening FSD have to be stepped up by focusing on financial inclusion through spread of branchless banking and promotion of information and communication technology.

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Conclusion and Recommendations

Post-Keynesian Empirical Research and the Debate on Financial Market Development ◽

10.4018/978-1-4666-6018-2.ch009 ◽

2014 ◽

pp. 226-238

Keyword(s):

Economic Growth ◽

Growth Process ◽

Financial Sector ◽

Policy Implications ◽

Future Research ◽

Financial Sector Development ◽

Research Findings ◽

Potential Channels

This book started with a brief review of different outlooks on the role of financial sector development in the process of economic growth. Then it highlighted the fact that recent studies, particularly those originating from modern growth theory, suggest that financial intermediation affects growth through various channels. To test this proposition, an empirical model was built, data were obtained, empirical tests were carried out, and results were discussed. The final chapter in this book, therefore, summarises key research findings and discusses the potential channels through which financial sector development affects the economic growth process. The chapter further highlights contributions of this research to growth studies, discusses policy implications arising from the findings of this research, and provides directions for future research and analysis.

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The Impact of Monetary Policy and Financial Sector Development on Economic Growth in GCC Countries

GCC Financial Markets ◽

10.2307/j.ctt1s474r3.10 ◽

2017 ◽

pp. 165-184

Author(s):

Elias El-Achkar ◽

Wassim Shahin

Keyword(s):

Economic Growth ◽

Monetary Policy ◽

Financial Sector ◽

Financial Sector Development ◽

Gcc Countries ◽

The Impact

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Financial Sector Development and Economic Growth: The Case of Ghana (1980-2009)

SSRN Electronic Journal ◽

10.2139/ssrn.2811036 ◽

2011 ◽

Author(s):

Daniel Frimpong Yeboah

Keyword(s):

Economic Growth ◽

Financial Sector ◽

Financial Sector Development

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Investigating Finance-Growth Nexus: Further Evidence from Nigeria

International Journal of Economics and Finance ◽

10.5539/ijef.v10n9p121 ◽

2018 ◽

Vol 10 (9) ◽

pp. 121 ◽

Cited By ~ 1

Author(s):

Adeola Yahya Oyebowale ◽

Noah Kofi Karley

Keyword(s):

Economic Growth ◽

Exchange Rate ◽

Private Sector ◽

Central Bank ◽

Government Expenditure ◽

Secondary Data ◽

Financial Sector ◽

Capital Formation ◽

Causality Test ◽

Financial Sector Development

This study investigates the influence of financial sector development on economic growth in Nigeria during the period 1982 to 2015. As such, the study obtained annual secondary data from the Central Bank of Nigeria statistical bulletins and World Bank financial database. The empirical model for this study examines growth in savings, growth in exchange rate, growth in government expenditure, growth in stock market capitalization, growth in credit to private sector, growth in gross capital formation, growth in trade openness and growth in broad money on economic growth in Nigeria. The multiple regression output reveals that growth in government expenditure and growth in gross capital formation are statistically significant on economic growth in Nigeria at 1% and 10% respectively under the period under investigation while other regressors in the model prove to be statistically insignificant. VAR test shows that there is considerable short-run causality running from lags of regressors to economic growth in Nigeria except for lag 1 of growth in exchange rate and lag 2 of growth in credit to private sector. The granger causality test reveals the existence of bi-directional causality between financial sector development and economic growth in Nigeria during the period under investigation. Hence, this study supports the ‘feedback hypothesis’ view on finance-growth. Based on these empirical results, this study recommends effective channeling of funds to the private sector and autonomy of the Central Bank of Nigeria in the use of monetary policy tools.

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