Financial Development and Economic Growth: An Overview

Khan, Mohsin S.; Senhadji, Abdelhak S

doi:10.5089/9781451874747.001

Cited by 212 publications

(207 citation statements)

References 30 publications

Supporting

Mentioning

184

Contrasting

Unclassified

Order By: Relevance

“…For instance, the findings from the empirical works of Ndebbio (2004), Khan and Senhadji (2000), Levine (1997), Bencivenga, Smith and Starr, (1995), Obstfeld (1994), and King and Levine (1993) generally suggest that through a number of mechanisms, financial development impact positively on economic growth. Furthermore, Adenutsi (2002) concludes that though financial development does not directly promote economic performance, it does enhance savings mobilisation by commercial banks which in turn stimulates growth in Ghana.…”

Section: Financial Development and Economic Growthmentioning

confidence: 99%

Financial development, international migrant remittances and endogenous growth in Ghana

Adenutsi

2011

Studies in Economics and Finance

View full text Add to dashboard Cite

Purpose: This paper seeks to provide further insights into understanding the finance-growth nexus by verifying the hypothesis that financial development promotes economic growth through its capacity to attract increased international migrant remittances to Ghana. Design/Methodology/Approach: A dynamic equilibrium-correction mechanism model for the period 1987(3)- 2007(4) was estimated following the Johansen cointegration procedure. This approach produced maximum likelihood estimators of the unconstrained cointegrating vector, and suggested the number of cointegrating vectors without relying on an arbitrary normalization. Findings: The findings reveal two stylized facts with reference to Ghana. First, although financial development Granger-causes international migrant remittance inflows, it is in itself directly detrimental to endogenous growth. Second, international migrant remittance inflows are statistically significant in explaining variations in endogenous growth in the short run as well as in the long run. Practical Implications: Since directly, financial development hampers endogenous growth, but Granger-causes increased inflows of migrant remittances, and these remittances impact positively but marginally on endogenous growth, it follows that the sequencing of implementing Ghana's financial reform programmes should be reexamined, whilst an enabling environment is created to induce Ghanaians living abroad to remit home through official channels. Originality/Value: International migrant remittances were found to be statistically significant in promoting endogenous growth, albeit marginally. Financial development does not directly engender growth, unless it succeeds in attracting non-debt foreign capital in the form of remittances through the formal sector. Financial development causes migrant remittance inflows which impact positively on growth. Keywords: Financial Development, Economic Growth, International Migrant Remittances, Ghana INTRODUCTIONA well-functioning financial sector is expected to attract idle funds for financing economic growth and development projects. Generally, international migrant remittances are highly significant to low-income economies constituting about 2% of their gross domestic product (GDP) and 6.2% of their imports (World Bank, 2003). Besides, these remittances have, in recent years, surpassed foreign direct investment or official development assistance, export revenues, and foreign aid (Giuliano and Ruiz-Arranz, 2005; World Bank, 2006). Consequently, in recent years, international migrant remittance flows to developing countries have attracted the attention of policymakers, researchers and scholars. The rising interest and enquiry into the continuous increasing remittance flows to developing countries, notwithstanding, experts have expressed divergent views on its implications for economic growth and development. On one hand, remittances are believed to be a catalyst for accelerated economic growth and development as they increase purchasing power of households and se...

show abstract

Section: Financial Development and Economic Growthmentioning

confidence: 99%

Financial development, international migrant remittances and endogenous growth in Ghana

Adenutsi

2011

Studies in Economics and Finance

View full text Add to dashboard Cite

show abstract

“…The overall financial development is necessary for economic growth at the macro-level [Andersen and Tarp (2003); Khan and Senhadji (2000); Levine (2002)]. A more advanced intermediation enables firms to raise and manage large amount of funds more effectively, resulting in a rapid economic development.…”

Section: Overview Of the Financial And Trade Policies In Pakistanmentioning

confidence: 99%

Trade Liberalisation, Financial Sector Reforms, and Growth

Khan¹,

Qayyum²

2022

pdr

View full text Add to dashboard Cite

The relationship between trade liberalisation, financial reforms and economic growth has been well-documented in the economic literature. A considerable body of literature suggests a strong and positive link between trade liberalisation, financial development and economic growth. It has been argued that trade and financial liberalisation policies reduce the inefficiency in the production process and positively influence economic growth. This argument is strengthened by the fact that countries with more open trade and financial policies may grow faster than those with restricted trade and financial policies. An increasing openness is expected to have positive impacts on economic growth [Jin (2000); Fry (1995, 1997); Darrat (1999); Levine (1997); Mckinnon (1973); Shaw (1973) and World Bank (1989)]. There is growing consensus among the researchers that both liberalisation policies are expected to exert positive impacts on economic growth.

show abstract

“…According to Saint-Paul, an economy that possesses highly developed financial markets, that allow the spreading of risk through financial diversification among the economic agents, will be able to achieve a higher level of development than an economy in which the financial markets are not well developed. Khan and Senhadji (2000), in a cross-country and panel study, using data for 159 countries over the period , found that the effect of financial development on growth was positive, but the size of the effect varied with the different indicators of financial development, the estimation method, the data frequency and the functional form of the relationship. They did not deal formally with the causality issue.…”

Section: Empirical Literature Investigation On the Finance-growth Nexusmentioning

confidence: 99%

Financial development and economic growth: literature survey and empirical evidence from sub-Saharan African countries

Acaravci

Öztürk

Acaravcı

2011

SAJEMS

View full text Add to dashboard Cite

In this paper we review the literature on the finance-growth nexus and investigate the causality between financial development and economic growth in sub-Saharan Africa for the period 1975-2005. Using panel co-integration and panel GMM estimation for causality, the results of the panel co-integration analysis provide evidence of no long-run relationship between financial development and economic growth. The empirical findings in the paper show a bi-directional causal relationship between the growth of real GDP per capita and the domestic credit provided by the banking sector for the panels of 24 sub-Saharan African countries. The findings imply that African countries can accelerate their economic growth by improving their financial systems and vice versa.

show abstract

Financial Development and Economic Growth: An Overview

Cited by 212 publications

References 30 publications

Financial development, international migrant remittances and endogenous growth in Ghana

Financial development, international migrant remittances and endogenous growth in Ghana

Trade Liberalisation, Financial Sector Reforms, and Growth

Financial development and economic growth: literature survey and empirical evidence from sub-Saharan African countries

Contact Info

Product

Resources

About