Does Financial Development Lead to Employment and Growth?

2020 ◽  
pp. 1-20
Author(s):  
Murat Gündüz ◽  
Yunus Özyıldırım
Keyword(s):  
Financial Markets ◽  
Financial Development ◽  
Financial Institutions ◽  
Financial Systems ◽  
G7 Countries ◽  
Causality Test ◽  
Fund Flow ◽  
Markets And Institutions ◽  
Causality Relationship ◽  
The Uk

Financial systems, which play a major role in the development of the economy, are primarily helping to fund flow and assist in capital increase. In this study, frequency domain causality test, which was developed by Geweke and Hosoya and developed by Breitung and Candelon, was used to analyze the causality relationship by short, medium, and long periods. This test, which provides periodical examination, was investigated to determine the effect of G7 countries on employment and growth of financial institutions and markets index used to calculate financial development index. Among the G7 countries, the development of financial markets and institutions has been affecting employment in Canada (short-medium), Germany (medium-long), Japan (short-medium-long), and the UK (medium-long); in addition, when the effects of economic growth on financial markets and institutions are investigated, Canada (short-medium), France (medium), Italy (medium-long), America (medium-long), Germany (medium-long), Japan (short-medium-long), and UK (short-medium-long) were determined by analysis.

scholarly journals Financial Development and Tax Revenue: How Catalytic Are Political Development and Corruption?

2018 ◽  
Vol 10 (8) ◽  
pp. 92 ◽  
Author(s):  
John Bosco Nnyanzi ◽  
John Mayanja Bbale ◽  
Richard Sendi
Keyword(s):  
Financial Markets ◽  
Financial Development ◽  
Financial Market ◽  
Financial Institutions ◽  
Low Income ◽  
Political Development ◽  
Tax Revenue ◽  
Tax Revenues ◽  
The Impact ◽  
Cent Change

Increasing domestic revenue mobilization remains a challenge for many governments, particularly in low-income countries. Using a sample of East African countries, the study sets off to investigate the impact of financial development from a multi-dimensional perspective on tax revenues for the period 1990 to 2014, and how political development and the control of corruption would enhance the observed nexus. The dynamic panel results from the system GMM estimation approach indicate a significant role of financial development overall and the financial institutions and financial markets in particular. A disaggregation of the duo suggests that it is the depth of financial institutions that greatly matters for tax revenue, with a one per cent change expected to yield about 0.26 per cent change in tax collections. It is then followed by their level of accessibility, financial market depth and efficiency. We fail to find significant evidence in support of financial market access and financial institutions efficiency although the possibility for the latter seems indismissible. Further evidence points to the catalytic nature of a good institutional and political environment in pursuit of higher tax-GDP ratio via financial development. Policies to promote the depth and accessibility of financial institutions as well the depth and efficiency of financial markets in East Africa alongside well-focused anti-corruption programs and democratic governance are likely to yield better fiscal outcomes in terms of domestic tax revenues critically needed to achieve the United Nations Sustainable Development Goals. We also confirm the positive role played by the lagged tax revenue, per capita GDP, trade openness, debt-to-GDP ratio and population density in the tax effort.

Financial Structure and Incentives

2012 ◽  
Vol 221 ◽  
pp. R23-R30
Author(s):  
Martin Čihák ◽  
Asli Demirgüç-Kunt
Keyword(s):  
Financial Markets ◽  
Financial Institutions ◽  
Risk Taking ◽  
Global Financial Crisis ◽  
Financial Sector ◽  
Financial Systems ◽  
Regulatory Approach ◽  
Private Incentives ◽  
The Global Financial Crisis

The article connects two streams of recent research on the financial sector. The first is the regulation literature, which emphasises the central role of incentives in the financial sector. It points out that the challenge of financial sector regulation, highlighted by the global financial crisis, is to align private incentives with public interest without taxing or subsidising private risk-taking. The second stream of research relates to financial structures and examines the mix of financial institutions and financial markets in an economy. It finds that, as economies develop, services provided by financial markets become comparatively more important than those provided by banks. The article brings these two streams together, pointing out that — as financial systems develop from bank-based to market-based — a traditional regulatory approach that relies on banking ratios becomes less effective. There is thus a greater need for properly monitoring and addressing the underlying incentive weaknesses in market-based systems.

scholarly journals The Causality Relationship between Energy Prices and Developed Countries Indices

2020 ◽  
Vol 2 (2) ◽  
pp. 1-18
Author(s):  
Yakup Soylemez
Keyword(s):  
Natural Gas ◽  
Stock Market ◽  
Crude Oil ◽  
Developed Countries ◽  
Energy Prices ◽  
G7 Countries ◽  
Causality Test ◽  
Developed Country ◽  
Crude Oil Prices ◽  
Causality Relationship

The aim of this study is to determine the causality relationship between energy prices, which are among the most important inputs of the economy, and selected stock market indices of developed countries. Crude oil and natural gas are used as energy variables. G7 countries were selected to represent developed countries. Stock indices used in the study are Dow&Jones (USA), DAX (Germany), CAC40 (France), FTSE250 (England), FTSE Italia All-Share (Italy), NIKKEI225 (Japan), and S&P/TSX (Canada). In the study, Johansen (1988) cointegration test and Granger (1969) causality test were used to analyze the causality relationship between energy prices and selected stock market indices. The research could not find a long-term balance relationship between energy prices and developed country indices. Also, while the causality relationship was determined between crude oil prices and NIKKEI225, DAX, and CAC40 indices, a causal relationship between natural gas prices and Dow&Jones and FTSE250 indices was determined. In the study, it was found that energy prices can be used for diversification in investments to be made with stock market indices of developed countries. This study is one of the most comprehensive studies in the literature that examines the relationship between energy prices and the stock market indices of G7 countries. It is expected to contribute to the literature in this way.

Part V Legal and Conduct Risk in Interconnected Financial Markets, 19 ‘Brexit’

2018 ◽  
Author(s):  
Mccormick Roger ◽  
Stears Chris
Keyword(s):  
Member State ◽  
Financial Markets ◽  
Financial Institutions ◽  
Member States ◽  
Cross Border ◽  
Legal Risks ◽  
The Uk ◽  
The Eu

This chapter considers the legal risks raised by Brexit. These include change of law risk for financial markets and especially for institutions that wish to do cross-border business in the EU. For example, while the UK remains in the EU, financial institutions carrying on certain ‘regulated activities’ are afforded so-called ‘passporting’ rights pursuant to which, broadly, they can take advantage of the fact that they are established and appropriately authorised in one member state to do business in other member states, without the need for separate permissions or authorisations in those other states. If the UK leaves the EU, such passporting rights may be terminated unless the Brexit negotiation results in them being preserved in some way.

scholarly journals Examining the relationship between finance, institutions and economic growth: evidence from the ASEAN economies

2019 ◽  
Vol 53 (4) ◽  
pp. 519-542 ◽  
Author(s):  
Hazwan Haini
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
Financial Development ◽  
Financial Institutions ◽  
Financial Integration ◽  
Institutional Quality ◽  
Institutional Development ◽  
Positive Role ◽  
Asean Economic Community ◽  
Dynamic Panel Estimator

AbstractThis study investigates the role of financial and institutional development on economic growth in the Association of Southeast Asian Nations (ASEAN) economies from 1995 to 2017 using a dynamic panel estimator. Financial development is instrumental in promoting economic growth; however, the effect of financial institutions and financial markets can differ. In recent years, the ASEAN economies have launched financial and institutional integration initiatives towards the goal of an integrated ASEAN Economic Community, which can have a profound impact on economic growth. The estimated results show that financial institutions are positive and significant towards economic growth, while financial markets are insignificant. Equally important, institutional quality plays a significant and positive role in economic growth. More interestingly, the study finds that institutional development is complementary to financial institutions and markets. Member states should emphasise on further financial integration across the ASEAN economies, allowing for the development of financial institutions and markets alongside improvements in institutional quality to increase the effectiveness of financial development.

Regulation and Regulators, 1970–92

2020 ◽  
pp. 108-129
Author(s):  
Ranald C. Michie
Keyword(s):  
Financial Markets ◽  
Banking Sector ◽  
Central Banks ◽  
Financial Systems ◽  
Financial Flows ◽  
Financial Activity ◽  
Markets And Institutions ◽  
Divide And Rule ◽  
National Boundaries ◽  
Formal Controls

Before 1970 regulators had relied on the principle of divide and rule as a way of keeping financial systems in order. What this meant in practice was that even in market-based economies authority was exercised behind national boundaries, aided by controls on international financial flows, and by insisting upon a degree of internal compartmentalization not only between banks and markets but also within the banking sector. By the 1970s it was becoming apparent that a growing proportion of financial activity was taking place away from those centres, markets, and institutions over which regulators could exercise some control. The result led governments to abandon formal controls and regulators to search for ways of supervising financial markets. Increasingly the solution was seen to lie with the megabanks as they had the capacity to monitor and police their own behaviour, and were closely supervised by central banks.

scholarly journals Financial situation of insurance sector for example, a Stock – Exchange Company PZU

2014 ◽  
Vol 15 (1) ◽  
pp. 55-67 ◽  
Author(s):  
Paweł Trippner
Keyword(s):  
Economic Development ◽  
Financial Markets ◽  
Financial Institutions ◽  
Stock Exchange ◽  
Financial System ◽  
Insurance Companies ◽  
The European Union ◽  
Financial Systems ◽  
Insurance Sector ◽  
Financial Condition

Abstract The insurance system is a very important element of the financial system of a country. As institutions of public trust, insurance companies play a crucial role in the process of transforming savings into investments, which directly affects the country’s economic development. Maintaining the insurance sector in a good financial condition guarantees stability of the financial system and economic development of Poland. The article aims to present the essence of operations of insurance companies as financial institutions, present their role in the economy, and describe various methods of appraising their financial condition. In order to fulfil the above goals, a research hypothesis is put forward stating that the financial condition of the insurance sector in Poland deteriorated in the analysed period as a result of an adverse impact of turbulence in financial markets and problems in financial systems in the European Union countries.

scholarly journals The effect of foreign direct investment on financial development

2019 ◽  
Vol 70 (1) ◽  
pp. 22-40
Author(s):  
Ayman Abdalmajeed Alsmadi ◽  
Mohammad Salem Oudat
Keyword(s):  
Financial Development ◽  
Arab Spring ◽  
Negative Relationship ◽  
Foreign Direct Investments ◽  
Causality Test ◽  
Political Conflicts ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Significant Negative Relationship ◽  
Causality Relationship

The aim of this paper is to analyze the relationship between foreign direct investments and financial development in Bahrain. The estimation financial development effects was performed for the period 1978 to 2015, which covers the political conflicts that recently happened in Middle East area (Arab Spring). On the other hand, the paper sought to examine the causality relationship between foreign direct investments and financial development. The study empirically investigates the short and long run equilibrium relationship between the variables by applied co-integration and Autoregressive Distributed Lags Approach (ARDL). The Granger causality test was employed to capture causality relationship. The obtained results show that there is a significant positive relationship between FDI and financial development in short and long run, while, a significant negative relationship between Arab Spring and financial development. However, the results also revealed bidirectional causality relationship between FDI and financial development.

Competition and financial institutions and markets development: a dynamic panel data analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Walid Abdmoulah
Keyword(s):  
Sensitivity Analysis ◽  
Developing Countries ◽  
Panel Data ◽  
Financial Markets ◽  
Financial Development ◽  
Financial Institutions ◽  
Positive Impact ◽  
Market Competition ◽  
2008 Financial Crisis ◽  
Content Type

Purpose This study aims to shed new light on the nexus between market competition and financial development (FD), using the new FD index developed by the IMF, covering financial institutions and markets access, depth and efficiency. Design/methodology/approach The author uses panel data from 140 countries over 2000–2014 period and a dynamic generalized method of moments (GMM) model, along with a sensitivity analysis over 2008 financial crisis. Findings Strong evidence of the positive impact of market competition, as measured by Boone index, on financial institutions and markets development is found, whereas banks concentration has a damaging effect on FD. Commonly used Lerner index is found to be irrelevant. Interestingly, none of the competition indexes in this study affects financial institutions returns, which hold even over 2008 financial crisis, likely at the expense of depth and access in developing countries. Institutions, as proxied by control of corruption, have broader positive impact on FD, particularly on financial markets. These findings have important implications for developing countries keen to foster the development of their financial system. Practical implications Policymakers should take into consideration that FI are unlikely to undertake deep improvements in terms of credit allocation depth and inclusion on a volunteer basis, unless constrained by regulations. When promoting bank competition, it is recommended to diversify methods targeting market competition, notably by promoting financial business diversification and intermediary efficiency, and tackling collusion arrangements or interest groups influence. Second, it is important to support households and small and medium enterprises’ access to finance. Third, it is highly recommended to promote good institutions given their overall beneficial role in promoting the financial system as a whole, notably financial markets. Originality/value To the best of the author’s knowledge, this study is the first to fully use the new IMF Financial Development index. It covers financial institutions and markets access, depth and efficiency, whereas most of previous findings focus on access to credit or cost of credit. Besides, the study uses a larger panel data from 140 countries over 2000–2014 period and a dynamic GMM estimator, along with a sensitivity analysis over (2007–2009) crisis. By exploring the impact of three different competition indicators, namely, Boone, Lerner and banks concentration indexes, the study responds to the concerns regarding the limitations of each of them.

Influence of mathematical models in finance on practice: past, present and future

1994 ◽  
Vol 347 (1684) ◽  
pp. 451-463 ◽  
Keyword(s):  
Mathematical Models ◽  
Financial Markets ◽  
Financial Institutions ◽  
Optimization Theory ◽  
Financial Modelling ◽  
The Past ◽  
Markets And Institutions ◽  
Finance Theory ◽  
Financial Research

The mathematics of finance contains some of the most beautiful applications of probability and optimization theory. Yet despite its seemingly abstruse mathematics, finance theory over the last two decades has found its way into the mainstream of finance practice. Today much of the applied financial research on the use of mathematical models takes place within financial institutions. It was not always thus. The scientific breakthroughs in financial modelling both shaped and were shaped by the extraordinary flow of financial innovation which coincided with revolutionary changes in the structure of world financial markets and institutions during the past two decades. The paper covers that development with a focus on the future role of mathematical models in finance practice.

Sign in / Sign up

Export Citation Format

Share Document