Financial Sector Development, Economic Growth, and Poverty Reduction: A Literature Review

Abstract

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Causality between Financial Deepening and Economic Growth in Nigeria: Evidence from a Bootstrap Rolling Window Approach

“…Empirically, a number of studies have examined the relationship between finance and growth (See [11], [12] and the literatures cited within). The results are often mixed resulting in some cases due to methodology used, proxy for financial development used and whether it is cross-country or country-specific study.…”

Capital Markets, Infrastructure Investment and Growth in the Asia Pacific Region

“…The literature identifies an association between capital market development and economic growth, Zhuang et al [124] although as with other drivers of growth, such as public investment, there is evidence of two-way causation in the association, Robinson [125]; Acquah-Sam [126]. Research using cross-country data and advanced econometric techniques confirms that countries with efficient capital markets experience stronger growth than those that do not, King and Levine [127]; Levine [128]; Zhuang et al [124].…”

“…The literature identifies an association between capital market development and economic growth, Zhuang et al [124] although as with other drivers of growth, such as public investment, there is evidence of two-way causation in the association, Robinson [125]; Acquah-Sam [126]. Research using cross-country data and advanced econometric techniques confirms that countries with efficient capital markets experience stronger growth than those that do not, King and Levine [127]; Levine [128]; Zhuang et al [124]. However, this does not occur in isolation and the strength of the association is determined by a number of endogenous conditions of which the most important is effective institutions which have been shown to influence the organization of production, reduce transaction and production costs, provide an enabling environment for competition and information flows, and play a central role in the way in which society distributes the benefits and the costs of economic development, North (p. 19,[82]).…”

“…Institutions may also improve a nation's productivity and factor accumulation, Hall and Jones [87], and research shows that government stability, law and order, accountability and the quality of the bureaucracy are significant determinants of foreign direct investment, Busse and Hefeker [89]. Institutions also play an important role by providing prudential supervision of banks and non-bank financial institutions, Lin [129], corporations and securities regulation, accounting and audit standards, and laws dealing with insolvency and compliance with capital market trading rules, Stiglitz [130]; Zhuang et al [124].…”

The Middle-Income Transition around the Globe: Characteristics of Graduation and Slowdown

“…Since the early 1990s, a number of studies have found a strong positive correlation between financial sector development and economic growth (for a review see Zhuang et al 2009). Path-breaking studies by Levine (1993a, 1993b) showed that a country would grow by an additional 1% annually if its financial depth (ratio of liquid liabilities to GDP) were to increase from the mean of the slowest growing countries to that of the faster growing.…”