Wealth, Financial Intermediation and Growth

Gaytán, Alejandro; Rancière, Romain

doi:10.2139/ssrn.860925

Cited by 16 publications

(8 citation statements)

References 35 publications

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“…Our paper (as we already mentioned) extends the Gaytan and Ranciere (2004) model to explain the wealth management segment of financial intermediation. However, for readers less interested in theory -we can explain our model using a simpler example.…”

Section: Appendix I: the Modelmentioning

confidence: 77%

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Does Financial Market Development Explain (or at Least Predict) the Demand for Wealth Management and Private Banking Services in Developing Markets?

Michael

Hartwell

Ho³

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Abstract:How should wealth managers and private bankers find and serve the wealthy -particularly in developing countries? Several banks and consulting firms provide market sizing estimates for the number of high net worth and ultra-high net worth individuals. However, it is still an open question whether financial management services actually create wealth (or increase the number of wealthy persons). How can financial advisors know if, on a macro-level, their service offerings grow their collective assets under management and increase their prospect numbers? In this paper, we find evidence that advanced wealth management and private banking services might help grow a wirehouse's book of business in developed, but not developing, markets. If wealth management and private banking follow general trends affecting the broader financial sector, their business also grows wealth in less advanced economies. Such evidence sheds light on the currently ambiguous role that financial development seems to play in creating affluent, high net worth and ultra-high net worth individuals. JEL Codes: D31, E01, E21, O10

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Section: Appendix I: the Modelmentioning

confidence: 77%

“…Again, the exact mechanism of propagation does not matter. As we described in the literature review, our model follows Gaytan and Ranciere (2004) -with the amendments we have just described.…”

Section: Prewealthmentioning

confidence: 99%

Does Financial Market Development Explain (or at Least Predict) the Demand for Wealth Management and Private Banking Services in Developing Markets?

Michael

Hartwell

Ho³

2013

SSRN Journal

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“…Several macroeconomic indicators may be at the root of the non-linear relationship between finance and growth. The work of Demetriades and Law (2004) [23], Gaytan and Ranciè re (2004) [31], Kpodar (2007) [42] and Eggoh (2009) [27] highlights the economic development level. They point out that financial development effect on growth depends on the level of income.…”

Section: ) Macroeconomic Indicators As a Threshold Variablementioning

confidence: 99%

Financial System Development and Economic Growth: A Critical Analysis of the Literature

Megnigang

2024

JWER

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Any developing countries (DCs) want to achieve strong, sustained growth to ensure their sustainable development by 2030. Indeed, promoting economic growth is one of the targets of the majority of the Sustainable Development Goals (SDGs) set by United Nations member countries. In their agenda, financial system development cited as an effective means of enabling developing countries to achieve high rates economic growth. However, research into the relationship between finance and growth has produced controversial results, showing that financial development is not always conducive to economic growth. These non-consensual findings call for further research into the subject. With this in mind, the aim of this paper is to critically analyze the literature on the subject with reference to the characteristics of developing countries. We have used the stylistic facts observed in these countries to see whether the way in which studies are conducted is in line with reality. These facts revealed that, as conducted, theoretical and empirical work does not really illustrate the nature of this relationship in the case of developing countries. The authors do not take into account certain specificities of these countries. The studies focus mainly on the formal financial sector, whereas in developing countries, the majority of the population is unbanked, so they tend to turn to the informal financial sector for savings and credit. In Pagano's theoretical model, on which most empirical work is based, the efficiency of financial intermediation is assumed to be an exogenous variable. However, in developing countries, many factors influence this function: poor governance, prevailing corruption, inefficiency of the legal system, government intervention in the financial sector, culture of non-repayment. Banking sector development is generally captured by credit to the private sector. However, in developing countries, the majority of bank credit is allocated to large commercial enterprises that sell mainly imported products. The indicators generally used to capture financial markets development do not reflect the amount of financing actually obtained by listed companies. Rather, they measure the level of secondary market activity, whose mission is to ensure the liquidity of securities and determine their prices. Taking account of financial dualism and integrating factors linked to the institutional environment, borrower behavior and financial intermediaries into the resource allocation function would be a significant advance in the literature.

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“…Other studies show that the effect of financial development on growth depends primarily on the level of income (e.g., Demetriades & Law, 2006;Gaytan & Rancière, 2004;Benhabib & Spiegel, 2000) consider that financial development has no significant impact on growth in low-income countries, and a greater effect in middle and high-income countries.…”

Section: Literature Reviewmentioning

confidence: 99%

The effects of the informal economy on the relationship between financial development and economic growth

Khayati,

Terzi

2023

Investment Management and Financial Innovations

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The relationship between economic growth and the development of financial systems has been analyzed from different perspectives for a long time. This paper addresses the effects of the informal economy on the relationship between financial development and economic growth, using a panel data covering 20 countries during the period 1993–2020. The results show that financial development, as measured by the IMF’s Financial Development Index, is positively associated with economic growth (the coefficient α1 related to financial development fd is positive and statistically significant at 5%). The results also show that large sizes of the informal economy moderate the influence of this association (α1 remains positive and statistically significant at 1%, while the coefficient α2 related to the interaction between financial development and informal economy, fd and ie, is negative and statistically significant at 1%). In effect, financial development has the greatest impact on economic growth whenever there is control over the informal economy’s size. Inversely, a favorable ground for the informal economy limits the positive association between financial development and economic growth. However, the results show the absence of a causality relationship between financial development and economic growth (W-bar = 1.0015 and Z-bar = 0.0048; p-value = 0.9980). The informal economy plays no role in making this type of link significant (W-bar = 0.9761 and Z-bar = -0.0756; p-value = 0.9520).

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Wealth, Financial Intermediation and Growth

Cited by 16 publications

References 35 publications

Does Financial Market Development Explain (or at Least Predict) the Demand for Wealth Management and Private Banking Services in Developing Markets?

Does Financial Market Development Explain (or at Least Predict) the Demand for Wealth Management and Private Banking Services in Developing Markets?

Financial System Development and Economic Growth: A Critical Analysis of the Literature

The effects of the informal economy on the relationship between financial development and economic growth

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