Rethinking Financial Deepening: Stability and Growth in Emerging Markets

Sahay, Ratna; Čihák, Martin; N’Diaye, Papa; Barajas, Adolfo; Pena, Diana Ayala; Bi, R.; Gao, Yuan; Kyobe, Annette J; Nguyen, Lam; Saborowski, Christian; Svirydzenka, Katsiaryna; Yousefi, Reza

doi:10.5089/9781498312615.006

Cited by 425 publications

(448 citation statements)

References 24 publications

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“…Thus, the current argument is that there is a quadratic relationship between finance and growth, an inverted U-curve, describing an optimal level of finance that maximises growth. Most EMEs are regarded to be far away from reaching the optimal size of their financial sectors, requiring further deepening of their financial markets (see Sahay et al, 2015).…”

Section: Financialisation In Emerging Economies: a Literature Reviewmentioning

confidence: 99%

Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Karwowski

Stockhammer

2017

Economic and Political Studies

125

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Financialisation research has originally focussed on the US experience, but the concept is now increasingly applied to emerging economies (EMEs). There is a rich literature stressing peculiarities of individual country experiences, but little systematic comparison across EMEs. This paper fills this gap, providing an overview of the debate and identifying six financialisation interpretations for EMEs. These different interpretations stress (1) financial deregulation (2) foreign financial inflows, (3) asset price volatility, (4) the shift from bankbased to market-based finance, (5) business debt, and (6) household indebtedness. We construct and compare measures of the six financialisation interpretations across a sample of 17 EMEs from Latin America, emerging Europe, Africa and Asia, contrasting them with the US and UK, two financialised economies. We find considerable variation in financialisation experiences of EMEs. Asset price volatility is found across continents. Asia has been more exposed to capital inflows, stock markets have gained importance and private sector debt risen. In emerging Europe financial deregulation has been more pronounced with lower levels but strong increases in household debt. The picture is similar in South Africa, the African EME in the sample, where household debt is comparatively high. Financialisation in Latin America is weaker according to our measures.Keywords: Financialisation; Emerging markets; Financial instability; Asset price volatility; Heterodox economics JEL codes: F30; F34; G01; G12; G15; B50 Acknowledgements: We would like to thank our colleague Rex McKenzie for comments on the paper. The usual disclaimers apply.

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Section: Financialisation In Emerging Economies: a Literature Reviewmentioning

confidence: 99%

Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Karwowski

Stockhammer

2017

Economic and Political Studies

125

View full text Add to dashboard Cite

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“…Meyer Bittencourt [43] or Shabaz [44]). Additionally, most of the countries in our sample are likely on the lower spectrum of the financial Kuznets curve (Baiardi and Morana [9]; Sahay et al [21]; Mandel [47]). Moreover, while lack of financial knowledge, cumbersome processes, availability and costs of financial products (Dabla-Norris et al [2]) weigh heavily against middle and low income groups in "normal times", the crisis exacerbated the situation even further.…”

Section: Discussionmentioning

confidence: 99%

“…In contrast, a number of studies show that financial deepening reduces income inequality: among others Meyer Bittencourt [43] for Brazil, Shabaz et al [44] for Iran, Shabaz and Islam [45] for Pakistan, and Ang [46] for India. The apparent contradiction is likely due to existence of the financial Kuznets curve (Sahay et al [21]; Baiardi and Morana [21]; Mandel [47]). They all find that income inequality decreases as financial deepening raises up to a threshold value, but after that further growth in financial deepening increases income gap.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Many authors (e.g. Kuznets [20]; Tsounta and Osueke [7]; Mah [21]) suggest that there exists a Kuznets curve indicating that with growth income distribution first worsens before it improves at higher levels of income. Thus, income gap directly depends on income level.…”

Section: Literature Reviewmentioning

confidence: 99%

“…4 Further methodological details can be found at http://iresearch.worldbank.org/PovcalNet/index.htm or http://databank.worldbank.org/data/reports.aspx?source=world-developme nt-indicators# 5 Interpreted as the usual aggregation of the departures from the Lorenz curve (Lorenz [21]; Gini [22]). …”

Section: Datamentioning

confidence: 99%

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Income Inequality in Latin America and Eastern EU through the Great Recession: An Ordered Probit Analysis

Mikek¹,

Carter²

2017

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Income distribution directly affects economic growth and the spending patterns in an economy. This paper employs an ordered probit panel to measure the effect of the Great Recession on income inequality in Latin American and Eastern EU members. The results suggest the crisis increased inequality in studied countries overall. However, those countries with low levels of inequality saw their Gini coefficients decrease further, while the crisis increased inequality in countries with already high inequality. Additionally, the results show that European Union membership on average contributed to lower likelihood of high Gini coefficients. Furthermore, marginal effects lend additional evidence of lower income gap for the Eastern EU members as they generally show negative marginal effects for countries with initially high inequality and positive for those with low Gini coefficients. Finally, we find no evidence that FDI and capital incentives have any direct impact on inequality, while GDP growth, poverty, and export incentives are associated with higher and tax revenues and export growth with lower income inequality.

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China's Banking Sector as the Foundation of Financial Reform

Hsu

2016

Asia & Pacific Policy Stud

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China is in the process of undertaking financial reform in many directions-introducing small private banks in the banking sector, promoting bond and equity finance, increasing exchange rate and capital account liberalization, enhancing financial regulation, and promoting the efficiency and scope of finance. While some foreign analysts have focused on the importance of liberalizing the exchange rate and capital account, we believe these aspects of reform take second priority to traditional banking reform, even though the ongoing process in practice is to slowly implement reforms in all areas at once.

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Rethinking Financial Deepening: Stability and Growth in Emerging Markets

Cited by 425 publications

References 24 publications

Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Financialisation in emerging economies: a systematic overview and comparison with Anglo-Saxon economies

Income Inequality in Latin America and Eastern EU through the Great Recession: An Ordered Probit Analysis

China's Banking Sector as the Foundation of Financial Reform

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