The effect of financial development on economic Growth: Evidence from south Asian developing countries

Abstract

The debate on financial development and economic growth has been comprehensively growing for a long time in the theoretical and empirical literature but there is still conflicting views on this association. Several studies have been conducted on different regions and countries whether banks or stock market finance have any influence on economic growth but the results are still far from a significant conclusion. The empirical findings inclined the view that both banks and stock markets have positive impact on economic growth however some studies support the negative association which may varies on different sample of countries, methodology of the study, proxies for financial development and over time. Based on the ongoing debate, the current study examines the impact of both stock markets and bank based financial development on economic growth in four developing countries of south Asia for the period of 1980-2017. The study use static, dynamic and long run estimators to efficiently investigate this association. The outcomes specify that both market-based and bank-based financial development indices affect economic growth significantly and positively which indicates that the development of banking system and stock markets perform a very propounding role in strengthening economic growth in the sample countries. The long-run estimators also confirm the presence of long run association between variables. The robustness tests confirm the results of all models that both banks and stock markets development are important and contribute to economic growth in the same way in the sample countries and can’t be differentiated. The findings of this study have important policy suggestions to the sample countries government’s channels, regulatory and supervisory efforts on further improvement of both stock markets and bank-based development in order to attain higher economic growth.

Nexus Among Energy Consumption, Financial Development, Trade Openness and Economic Growth: Evidence from South Asian Countries

“…Financial development has a major and favorable impact on economic growth. Financial development is desired for a well-functioning finance market, which is a necessary component of smooth economic activity in line with the conclusion with draw by past studies (Bibi, 2022).…”

Asymmetric impacts of ICT and energy intensity on agricultural productivity: Evidence from Asia‐Pacific region

“…These factors can indirectly impact agriculture by influencing the economy. A study by Bibi and Sumaira (2022a) established that broad money and gross fixed capital formation increased economic growth in four South Asian developing countries from 1980 to 2017. Another study by Bibi and Sumaira (2022b) reported that FDI inflow positively contributed to economic growth, whereas broad money had a detrimental effect on economic growth in the mixed panel of 193 countries during the period 1998-2018.…”

“…In addition, capital accumulation leads to an increase in investment in the economy, part of which may find its destination in the agriculture sector. Therefore, gross capital formation positively affects agricultural productivity (Bibi & Sumaira, 2022a). Similarly, an increase in savings means more capital to invest, which further improves agricultural productivity (Salahuddin et al, 2020).…”

“…Moreover, Jamil (2022b), in 195 mixed‐income countries for the period 1961–2020, found that the effect of trade openness on economic growth varied across different exchange rate regimes. In addition, Bibi and Sumaira (2022c) analyzed the impact of trade openness and savings on economic growth in four South Asian countries from 1980 to 2017. They documented that trade openness impeded economic growth while savings boosted it.…”

Carbon Emission Dynamics in India Due to Financial Development, Renewable Energy Utilization, Technological Innovation, Economic Growth, and Urbanization

“…The environmental growth-energy model has recently been updated to account for numerous aspects related to financial development. Researchers have examined the financial growth nexus for many samples of countries and regions, employing a wide variety of proxies and approaches, with conflicting results (Bibi & Sumaira, 2022). Dogan and Seker (2016) state that attempts to include the measurements of financial development are not unrealistic in the discussion on the relationship between environmental concerns, economic development, and energy use.…”