scholarly journals Examining the Impact of Financial Development on Energy Production in Emerging Economies

2021 ◽  
Vol 14 (2) ◽  
pp. 88
Author(s):  
Neil A. Wilmot ◽  
Ariuna Taivan
Keyword(s):  
Financial Development ◽  
Energy Production ◽  
Developing Economies ◽  
Ordinary Least Squares ◽  
Foreign Firms ◽  
Long Run ◽  
Panel Granger Causality ◽  
Domestic Credit ◽  
The Impact ◽  
The Relationship

Global energy production has been on the rise for many years, and reliance on traditional sources of energy remains strong. The extraction and production of energy can serve as an important avenue of growth, particularly for developing economies. To undertake such capital intensive project requires significant investment, and, intuitively, a well-functioning domestic financial system would be expected to aid in the growth of such industries. We investigate the relationship between financial development and energy production for 15 emerging countries, over the period of 1995–2017. After establishing the presence of a unit root, based upon panel data methods, a cointegrating relationship between financial development and energy production is confirmed. The results of the fully modified ordinary least squares (FMOLS) estimation establish a long run relationship in 11 of 15 countries in the sample. Panel Granger causality results provide a link between energy production and foreign direct investment (FDI), while such a link is absent for domestic credit. Policymakers should understand that development of the energy sector can provide an incentive for foreign firms to invest in emerging economics.

Investigation for Finance–Growth Nexus: A Dynamic Common Correlated Estimator Approach

2021 ◽  
pp. 097215092110162
Author(s):  
Saqib Mehmood ◽  
Ahmad Raza Bilal
Keyword(s):  
Developing Countries ◽  
Private Sector ◽  
Least Squares ◽  
Financial Development ◽  
Well Being ◽  
Ordinary Least Squares ◽  
Consumption Expenditures ◽  
Long Run ◽  
Domestic Credit ◽  
The Impact

The study investigated the impact of financial development in bringing the economic well-being, using the data of 10 selected developing countries, as a sample for the period from 1991 to 2017. However, the study utilizes the regression of group mean dynamic common correlated estimator (DCCE) by Chudik and Pesaran (2015) to analyse the said circumstance. For estimation, the present study is considering the major tycoons of financial development and their relevant areas that are significantly effecting the economic growth. However, the broad money (GAM1), domestic credit to private sector to GDP (GAM2), domestic credit to private sector by banks (GAM3), government’s final consumption expenditures (GAFCE) and foreign direct investment GAFC are major contributors in attaining the GDP per capita (GADA). However, the estimation of the concerned circumstance was also evaluated in terms of shorter and longer run estimations. The results of the short– and long–run estimations also authenticate the results of DCCE estimations. The robustness of the results is verified with the help of Pedroni (2004) test, fully modified ordinary least squares (FMOLS) test by Pedroni (2001) and dynamic ordinary least squares (DOLS) by Stock and Watson (1993) . The robustness tests also verify the factors that are considered as the major players of financial development for uplifting the concerned economies. Selected developing countries have the potential for utilizing their financial development options to manage their growth at the economic level. For practical implications and for policymaking, the ingredients of this particular study can be endorsed to get the desired results.

scholarly journals The Impact of Industrialization, Trade Openness, Financial Development, and Energy Consumption on Economic Growth in Indonesia

Economies ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 174
Author(s):  
Khalid Eltayeb Elfaki ◽  
Rossanto Dwi Handoyo ◽  
Kabiru Hannafi Ibrahim
Keyword(s):  
Economic Growth ◽  
Energy Consumption ◽  
Least Squares ◽  
Financial Development ◽  
Correction Term ◽  
Trade Openness ◽  
Ordinary Least Squares ◽  
Distributed Lag ◽  
Long Run ◽  
The Impact

This study aimed to scrutinize the impact of financial development, energy consumption, industrialization, and trade openness on economic growth in Indonesia over the period 1984–2018. To do so, the study employed the autoregressive distributed lag (ARDL) model to estimate the long-run and short-run nexus among the variables. Furthermore, fully modified ordinary least squares (FMOLS), dynamic least squares (DOLS), and canonical cointegrating regression (CCR) were used for a more robust examination of the empirical findings. The result of cointegration confirms the presence of cointegration among the variables. Findings from the ARDL indicate that industrialization, energy consumption, and financial development (measured by domestic credit) positively influence economic growth in the long run. However, financial development (measured by money supply) and trade openness demonstrate a negative effect on economic growth. The positive nexus among industrialization, financial development, energy consumption, and economic growth explains that these variables were stimulating growth in Indonesia. The error correction term indicates a 68% annual adjustment from any deviation in the previous period’s long-run equilibrium economic growth. These findings provide a strong testimony that industrialization and financial development are key to sustained long-run economic growth in Indonesia.

scholarly journals Financial development in Jordan: Where do remittances play a role in bank credit?

Accounting ◽  
2021 ◽  
Vol 7 (7) ◽  
pp. 1701-1708
Author(s):  
Hadeel Yaseen ◽  
Ghassan Omet
Keyword(s):  
Private Sector ◽  
Financial Development ◽  
Bank Credit ◽  
Research Issues ◽  
Stable Relationship ◽  
Long Run ◽  
Time Period ◽  
The Impact ◽  
The Relationship ◽  
Auto Regression

The Jordanian economy has been a recipient of huge amounts of remittances. Indeed, for more than a decade now, the inflow of this capital has been fluctuating around 10 percent of Gross Domestic Product (GDP). Within this context, the subject matter of remittances has resulted in the development of a myriad of research issues. One of these issues is the impact of remittances on financial development or bank credit to the private sector. This paper looks at the relationship between financial development and remittances in the Jordanian context. Based on the time period 1992-2019, and time series econometric techniques (co-integration and vector auto-regression, among others), this paper examines the impact of remittances on bank credit to the private sector, and on its main sectoral distributions. The estimated results reveal some interesting findings. There is no long-run stable relationship between bank credit to the private sector and remittances. However, there is a stable long-run relationship between credit to individuals (households) and remittances, and between credit to the construction sector and remittances. These conclusions imply that remittances, on average, promote private consumption in general, and residential spending.

scholarly journals The nexus between financial development and poverty reduction in Egypt

2018 ◽  
Vol 3 (2) ◽  
pp. 40-55
Author(s):  
Vivian Bushra Kheir
Keyword(s):  
Private Sector ◽  
Financial Development ◽  
Poverty Reduction ◽  
Incentive Structure ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Domestic Credit ◽  
Per Capita ◽  
The Impact

Purpose The purpose of this study is to empirically examine the impact of financial development on poverty reduction in Egypt. The paper also investigates whether financial development affects poverty via gross domestic product (GDP) growth. Design/methodology/approach This study uses the autoregressive distributed lag approach to estimate two specifications. The first is dependent on poverty by the ratio domestic credit to the private sector (percentage of GDP) and the second is dependent on the poverty by the ratio liquid liabilities to GDP or M3/GDP. The data are annual and cover the period from 1980 to 2015. Findings In long run, the study finds that relationship between economic growth and poverty is bidirectional. Financial development and poverty (household final consumption expenditure per capita) are complementary as bidirectional (in Granger sense). In short run, the study finds the bidirectional causality between financial development (real domestic credit to private sector per capita) and poverty reduction. Practical implications The findings suggest that governments should remove policies that impede the ability of banks to offer loan products or undermine the commercial incentive structure for banks or borrowers. It is crucial to enhance the role of specialized state-owned banks in financial intermediation. Social implications Several attempts have been made to investigate the relationship between financial development and other macroeconomic variables, but few studies have examined the impact of financial development on poverty reduction. Furthermore, the majority of the previous studies are based on Asia and Latin America – affording Egypt very little or no coverage at all.

An empirical relationship between financial development indicators and human capital in some selected Asian countries

2017 ◽  
Vol 44 (3) ◽  
pp. 337-349 ◽  
Author(s):  
Madhu Sehrawat ◽  
A.K. Giri
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Financial Development ◽  
Ordinary Least Squares ◽  
Development Economic ◽  
Asian Countries ◽  
Content Type ◽  
Development Indicators ◽  
Long Run ◽  
Panel Granger Causality

Purpose The purpose of this paper is to investigate the relationship between financial development indicators and human capital for Asian countries using the annual data from 1984-2013. Design/methodology/approach The stationarity of the variables are checked by Levin-Lin-Chu, Im-Pesaran-Shin, Fisher-type augmented Dickey-Fuller and Philips-Perron panel unit-root tests. The 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 panel dynamic ordinary least squares (PDOLS) and fully modified ordinary least squares (FMOLS) techniques are used. The short-term and long-run causality is examined by panel granger causality. Findings The Pedroni’s and Kao’s co-integration approaches support the existence of the long-run relationship among the indicators of financial development, economic growth and human capital. The PDOLS and FMOLS estimators revealed that both financial development indicators and economic growth variable act as an important driver for the increase in human capital. The results of panel granger causality indicate that causality runs from indicators of financial development, economic growth and public spending on education to human capital. Originality/value There is hardly any study that examine the impact of financial development indicators and economic growth on human capital in Asian economies, therefore the present study fill the research gap in the literature.

scholarly journals The Relationship between Financial Development and Economic Growth: The Case of Turkey

2016 ◽  
Author(s):  
Müge Manga ◽  
Mehmet Akif Destek ◽  
Muammer Tekeoğlu ◽  
Erkut Düzakın
Keyword(s):  
Economic Growth ◽  
Private Sector ◽  
Trade Liberalization ◽  
Money Supply ◽  
Financial Development ◽  
Integration Test ◽  
Domestic Credit ◽  
The Impact ◽  
Bound Test ◽  
The Relationship

The relationship between financial development and economic growth and the direction of causality between them have been received a lot of attention recently by many scholars. It is also important to analyze this relationship and the direction of causality due to implications of policies. In this study the relationship between financial development, trade liberalization and economic growth for Turkey are examined using three different models. Model 1, 2 and 3 investigate the effect of domestic loans to the private sector and trade liberalization on GDP, the impact of the domestic credit provided by banks to the private sector and trade liberalization on GDP and the effect of M2 money supply and M2 trade liberalization on GDP, respectively. Data extracted from World Development Indicators. Autoregressive-Distributed Lag Bound Test (ARDL) is used as a co-integration test to determine the long run relationship between variables. In addition, Toda and Yamamoto (1995) is utilized to test the direction of causality between financial development and economic growth according to the three financial indicators such as domestic loans to the private sector, the domestic credit provided by banks to the private sector and M2 money supply. According to the results there is a unidirectional relationship from economic growth to domestic loans to the private sector and the domestic credit provided by banks to the private sector. Additionally, the results indicate that a bidirectional relationship exist between M2 money supply and economic growth.

The role of financial development in economic growth: empirical evidence from Indian states

2015 ◽  
Vol 10 (4) ◽  
pp. 765-780 ◽  
Author(s):  
Madhu Sehrawat ◽  
A K Giri
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Ordinary Least Squares ◽  
Annual Data ◽  
Indian States ◽  
Content Type ◽  
Long Run ◽  
Panel Granger Causality ◽  
Integration Test

Purpose – The purpose of this paper is to examine the relationship between financial development and economic growth in Indian states using annual data from 1993 to 2012. Design/methodology/approach – The stationarity properties are checked by Levin-Lin-Chu and Im-Pesaran-Shin panel unit root tests. The study employed the Pedroni’s panel co-integration test to examine the existence of long-run relationship and the coefficients of co-integration are examined by fully modified ordinary least squares. The short term and long-run causality is checked by panel granger causality. Findings – The co-integration test confirms a long-run relationship between financial development and economic growth for Indian states. The results support the supply leading hypothesis and highlight the importance of financial development in economic growth in Indian states. The findings also indicate that bank-centric financial sector of India has the potential of economic growth through credit transmission. Research limitations/implications – The present study recommends for appropriate reforms in financial market to attain economic growth in India. The findings will be useful for India’s policymakers in order to maintain the parallel expansion of financial development and economic growth. Originality/value – Till date, there is no study that includes all 28 states in analyzing the role of financial development in economic growth for Indian economy by applying latest econometric techniques. Further, the study uses gross domestic state product instead of net domestic state product as proxy for economic growth because of the presence of different depreciation rates.

scholarly journals The Relationship between FDI, Economic Growth and Financial Development in Cabo Verde

2017 ◽  
Vol 9 (5) ◽  
pp. 132 ◽  
Author(s):  
Leandro Do Rosário Viana Duarte ◽  
Yin Kedong ◽  
Li Xuemei
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Causality Analysis ◽  
Cabo Verde ◽  
Granger Causality Analysis ◽  
Long Run ◽  
Domestic Credit ◽  
Bound Test ◽  
The Relationship ◽  
Positive Effect

This paper examines the relationship between foreign direct investment (FDI), economic growth and financial development in Cabo Verde for the period 1987-2014.The methodology involves the use of bound test approach to cointegration (ARDL) as well as the ECM-Granger causality analysis. The bound test indicated that there is a long-run relationship when the variable GDP and FDI are the dependent variable. Moreover, the results indicated that FDI has a positive effect on the economic growth in Cabo Verde. It also found a bidirectional causality between FDI and economic growth, i.e. FDI granger causes GDP and GDP granger cause FDI. Thus, we concluded that higher levels of FDI inflow mean higher levels of economic growth and vice versa for the economy of Cabo Verde. Furthermore, we found that both economic growth and domestic credit to private sector are important factors in stimulating the FDI into the country. These results found are important for the country policymakers to take appropriate measures to enhance and improve the condition for FDI inflow in Cabo Verde.

The relationship between financial development indicators and human development in India

2014 ◽  
Vol 41 (12) ◽  
pp. 1194-1208 ◽  
Author(s):  
Madhu Sehrawat ◽  
A.K. Giri
Keyword(s):  
Human Development ◽  
Financial Development ◽  
Decomposition Analysis ◽  
Variance Decomposition ◽  
Annual Data ◽  
Content Type ◽  
Development Indicators ◽  
Long Run ◽  
The Impact ◽  
The Relationship

Purpose – The purpose of this paper is to examine the relationship between financial development indicators and human development in India using annual data from 1980-2012. Design/methodology/approach – The Ng-Perron unit root test is used to check for the order of integration of the variables. The long run relationship and short run dynamics are examined by implementing the ARDL bounds testing approach to co-integration. Granger’s non-causality test and variance decomposition techniques are also used to examine the impact of financial development indicators on human development. Findings – The results confirm a long run relationship among the variables. The results of granger non causality indicate that unidirectional causality runs from financial development indicators to human development index (HDI). The variance decomposition analysis shows that among all the financial indicators, broad money supply (M3) has the largest contribution to changes in human development in India. Research limitations/implications – The present study recommends for appropriate reforms in financial market to attain sustainable human development in India. The findings will be useful for India’s policy makers, in order to maintain the parallel expansion of financial development and human development. Originality/value – This paper is first of its kind to empirically examine the casual relationship between financial development indicators and human capital development proxied by HDI in India by using modern econometric techniques.

The impact of financial development on economic growth

2016 ◽  
Vol 11 (4) ◽  
pp. 569-583 ◽  
Author(s):  
Madhu Sehrawat ◽  
A.K. Giri
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Structural Breaks ◽  
Regional Cooperation ◽  
Ordinary Least Squares ◽  
Annual Data ◽  
Content Type ◽  
Long Run ◽  
Integration Test ◽  
The Impact

Purpose The purpose of this paper is to investigate the possible co-integration and the direction of causality between financial development and economic growth in South-Asian Association for Regional Cooperation (SAARC) countries using annual data from 1994 to 2013. Design/methodology/approach The Carrion-i-Silvestre et al. (2005) stationarity test with structural breaks is used to check the stationarity. The Westerlund (2006) panel co-integration test is employed to examine the long-run relationship among the variables. To carry out tests on the co-integrating vectors, fully modified ordinary least squares (FMOLS) and PDOLS techniques are used and panel Granger causality test is used to examine the direction of the causality. Findings The Westerlund (2006) panel co-integration test confirms the existence of the long-run relationship between financial development and economic growth for SAARC countries. The coefficients of FMOLS and DOLS indicate that index of financial development (IFD) and trade openness supports economic growth in SAARC region. In the short-run, there is unidirectional causality running from IFD to economic growth. Research limitations/implications In the view of these findings it is recommended that countries in the region should adopt policies geared toward financial sector development to attain high economic growth. Originality/value To the best of the author’s knowledge, no studies have looked into SAARC countries to study the relationship between financial development and economic growth, this study is the first of its kind.

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