A new measure of financial development: Theory leads measurement

Financial Deepening and Economic Growth in Advanced and Emerging Economies

“…The general equilibrium model results presented above rely on classical economic principles in which the self‐adjusting mechanism of the real interest rates would balance demand for and supply of financial assets in a market‐driven economy and do not contain liquidity trap and credit crunch situations as imagined by Keynes (). These results are consistent with the literature that has emerged since the late 1960s on harmful impacts of financial repressions in works of McKinnon (), Shaw (), Roubini and Sala‐i‐Martin () and Stiglitz and Weiss () and more recently in Boyd and Jalal ().…”

CEO's Religious Affiliation and Managerial Conservatism

“…Finally, we collect country characteristics from La Porta et al. () and Boyd and Jalal (). GDP is the average of the PPP‐adjusted GDP per capita from 1980 to 2008.…”

Tax evasion, financial development and inflation: Theory and empirical evidence

“…Real GDP is a widely accepted measure of economic development in the literature (Boyd, Levine and Smith, 2001;Boyd and Jalal, 2012) and it may plausibly be used as an indicator of financial development since King and Levine (1993) showed that economic and financial development are closely related (Boyd and Jalal, 2012). The Control variable set also includes two other important subsets, where the first set measures the level of financial development in each country, and comprises of: Dcpb, the domestic credit provided by the banking sector; P rvcrt, the domestic credit provided by the banking sector as well as other financial institutions or intermediaries; Intsprd, the interest rate differential between loans and deposits; M 3, the liquid liabilities as a percentage of real GDP and Stmk, a measure of stock market development calculated as the market capitalisation of all listed companies as a percentage of real GDP.…”

“…The Control variable set also includes two other important subsets, where the first set measures the level of financial development in each country, and comprises of: Dcpb, the domestic credit provided by the banking sector; P rvcrt, the domestic credit provided by the banking sector as well as other financial institutions or intermediaries; Intsprd, the interest rate differential between loans and deposits; M 3, the liquid liabilities as a percentage of real GDP and Stmk, a measure of stock market development calculated as the market capitalisation of all listed companies as a percentage of real GDP. These variables are often used in the financial development literature as indicators of the depth and the efficiency of both the banking and the financial sector (King and Levine, 1993;Levine and Zervos, 1998;Levine, Loayza and Beck, 2000;Boyd et al 2001;Barth et al 2002 andJalal, 2012). From these variables, we construct two financial development indicators using principal components analysis (PCA) and extract the unobserved common factors of these variables.…”

“…Intsprd is defined as the lending interest rate minus the deposit interest rate as published by the World Bank, and it indicates the magnitude of the wedge that financial repression induces between the interest rates that banks charge on loans and the interest rate banks offer on deposits 13 . This additional second proxy for financial development, given that Gdppc is already a viable alternative to our first proxy, F indev, is an attempt to follow the recommendations of Levine (2005) and Boyd and Jalal (2012) that empirical measures of financial development should directly measure financial functions performed by the financial system. The PCA allows us to reduce the dimensionality of the set of variables to be included in our empirical analysis, whilst still retaining most of the informational content offered by these same variables (Bittencourt, 2012).…”