The Relationship Between Economic Development, Banking Sector Performance and Financial Globalization: Evidence from OECD Countries

Yıl 2024, , 1 - 18, 17.05.2024

Sevgi Sümerli Sarıgül , Pınar Avcı

https://doi.org/10.17336/igusbd.1166058

Öz

The aim of this study is to examine the relationship between the economic development of the 11 OECD countries selected in the period 1990-2018, banking sector performance and financial globalization by integrating investments and trade openness as explanatory variables. The cointegration between variables is investigated by Pedroni, Kao and Westerlund tests and the long-term coefficients are determined by Driscoll-Kraay standard errors forecasters. Finally, the causality relationship between variables is tested in the Dumitrescu-Hurlin panel bootstrap approach. Empirical findings indicate the existence of cointegration between variables. The banking sector performance, financial globalization and investments have a statistically significant positive effect on economic development, while the trade openness has a meaninglessly positive effect. They also indicate a two-way causality between the economic development and banking sector performance and investments, and a one-way causality running from trade openness to economic development. Therefore, the findings make political recommendations for both policymakers and future studies.

Anahtar Kelimeler

Banking Sector Performance, Economic Development, Financial Globalization, Panel Data, Driscoll-Kraay

Ekonomik Gelişme, Bankacılık Sektör Performansı ve Finansal Küreselleşme Arasındaki İlişki: OECD Ülkeleri Örneği

Öz

Bu çalışmanın amacı, 1990-2018 döneminde seçilen 11 OECD ülkenin ekonomik gelişmesi, bankacılık sektör performansı ve finansal küreselleşme arasındaki ilişkiyi açıklayıcı değişken olarak yatırımları ve ticari açıklığı da entegre ederek incelemektir. Çalışmada değişkenler arasında eşbütünleşme varlığı Pedroni, Kao and Westerlund testleriyle incelenmekte ve uzun dönem katsayıları Driscoll-Kraay standard errors tahmincileriyle saptanmaktadır. Son olarak, değişkenler arasındaki nedensellik Dumitrescu-Hurlin panel bootstrap nedensellik testi sınanmaktadır. Ampirik bulgular, değişkenler arasında eşbütünleşme varlığını göstermektedir. Bankacılık sektörünün performansı, finansal küreselleşme ve yatırımların ekonomik gelişmeyi istatistiksel olarak anlamlı bir şekilde pozitif yönde etkilerken ticari açıklığın da anlamsız bir şekilde pozitif yönde etkilemektedir. Bulgular, ekonomik gelişme ile hem bankacılık sektörünün performansı ve yatırımlar arasında çift yönlü nedensellik ilişkisi olduğunu ve ticari açıklıktan ekonomik gelişmeye doğru uzanan tek yönlü nedensellik ilişkisi olduğunu göstermektedir. Dolayısıyla çalışma bulguları hem politika yapıcılar hem de gelecekteki çalışmalar için politik önerilerde bulunmaktadır.

Anahtar Kelimeler

Bankacılık Sektör Gelişimi, Ekonomik Gelişme, Finansal Küreselleşme, Panel Veri, Driscoll-Kraay

Kaynakça

• ABUSHARBEH, M. T. (2017). The impact of banking sector development on economic growth: Empirical analysis from Palestinian economy. Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB), 6(2), 2306-2316.
• ADEBAYO, T.S. (2022). Do CO2 emissions, energy consumption and globalization promote economic growth? Empirical evidence from Japan. Environmental Science and Pollution Research, 28, 34714-34729. https://doi.org/10.1007/s11356-021-12495-8
• AKPANSUNG, A. O., & BABALOLA, S. J. (2011). Banking sector credit and economic growth in Nigeria: An empirical investigation. CBN Journal of Applied Statistics, 2(2), 51-62.
• ALTUNÇ, Ö. F. (2008). Türkiye’de finansal gelişme ve iktisadi büyüme arasindaki nedenselliğin ampirik bir analizi. Eskişehir Osmangazi Üniversitesi İİBF Dergisi, 3(2), 113-127.
• AMABLE, B., CHATELAIN, J. B. & DE BANDT, O. (2002). Optimal capacity in the banking sector and economic growth. Journal of Banking & Finance, 26(2-3), 491-517. doi:10.1016/S0378-4266(01)00231-X
• ARESTIS, P., DEMETRIADES, P. O. & LUINTEL, K. B. (2001). Financial development and economic growth: The role of stock markets. Journal of Money, Credit and Banking, 33(1), 16-41.
• AWDEH, A. (2012). Banking sector development and economic growth in Lebanon. International Research Journal of Finance and Economics, 100, 53-62.
• BALCILAR, M., GUPTA, R., LEE, C. C. & OLASEHINDE-WILLIAMS, G. (2018). The synergistic effect of insurance and banking sector activities on economic growth in Africa. Economic Systems, 42(4), 637-648. doi:10.1016/j.ecosys.2018.08.002
• BHANUMURTHY, N. R. & KUMAWAT, L. (2020). Financial globalization and economic growth in South Asia. South Asia Economic Journal, 21(1), 31-57.
• CARP, L. (2014). Financial globalization and capital flows volatility effects on economic growth. Procedia Economics and Finance, 15, 350-356.
• DOGAN, E. & SEKER, F. (2016). Determinants of CO2 emissions in the European Union: the role of renewable and non-renewable energy. Renew. Energy, 94, 429–439. doi:10.1016/j.renene.2016.03.078.
• DRISCOLL, J. C. & KRAAY, A. C. (1998). Consistent covariance matrix estimation with spatially dependent panel data. Rev. Econ. Stat. 80(4), 549-559. https://doi.org/10.1162/003465398557825.
• DUMITRESCU, E.I. & HURLIN, C. (2012). Testing for Granger non-causality in heterogeneous panels. Econ. Model. 29 (4), 1450-1460.
• EGBETUNDE, T. & AKINLO, A. E. (2015). Financial globalization and economic growth in Sub-Saharan Africa: Evidence from panel cointegration tests. African Development Review, 27(3), 187-198.
• GAIES, B., GOUTTE, S. & GUESMI, K. (2019). What interactions between financial globalization and instability?-Growth in developing countries. Journal of International Development, 31, 39-79.
• GHOSH, A. (2017). How does banking sector globalization affect economic growth?. International Review of Economics and Finance, 48, 83-97. doi:10.1016/j.iref.2016.11.011
• HAKEEM I., M. (2010). Banking development, human capital and economic growth in Sub-Saharan Africa (SSA). Journal of Economic Studies, 37(5), 557-577.
• HARALAYYA, B. & AITHAL, P. S. (2021). Implications of banking sector on economic development in India. George Washington International Law Review, 7(1), 631-642.
• HODELIN, R.S. (2022). Public banking and economic growth: The experiences of 10 countries since the 1950s until 2017. Economic Systems, 46. https://doi.org/10.1016/j.ecosys.2021.100938
• HOECHLE, D. (2007). Robust Standard Errors for Panel Regressions with Cross-Sectional Dependence. The Stata Journal, 7, 281-312.
• HYE, Q. M. A. (2011). Financial development index and economic growth: empirical evidence from India. The Journal of Risk Finance, 12(2), 98-111.
• HWANG, J. T., CHUNG, C. P. & WANG, C. H. (2010). Debt overhang, financial sector development and economic growth. Hitotsubashi Journal of Economics, 51(1), 13-30.
• KANG, S. J. & SAWADA, Y. (2000). Financial repression and external openness in an endogenous growth model. Journal of International Trade & Economic Development, 9(4), 427-443. doi:10.1080/096381900750056858
• KANU, S. I & OZURUMBA, B. A. (2014). Capital formation and economic growth in Nigeria. Global Journal of Human-Social Science: Economics, 14(4). 42-58.
• KAO, C. (1999). Spurious regression and residual-based tests for cointegration in panel data. Journal of Econometrics, 90, 1-44. doi:10.1016/S0304-4076(98)00023-2
• KAZARENKOVA, N.P. & KOLMYKOVA, T.S. (2017). Modern growth points of the Russian banking sector and their impact on economic development of the country. Journal of Applied Economic Sciences, Volume XII, 4(50), 985-994.
• KEHO, Y. (2017). The impact of trade openness on economic growth: The case of Cote d’Ivoire. Cogent Economics & Finance, 5(1), 1-14. doi:10.1080/23322039.2017.1332820
• KIHOMBO, S., VASEER, A., AHMED, Z., CHEN, S., KIRIKKALELI, D. & ADEBAYO, T.S. (2022). Is there a tradeoff between financial globalization, economic growth, and environmental sustainability? An advanced panel analysis. Environmental Science and Pollution Research, 29, 3983-3993. https://doi.org/10.1007/s11356-021-15878-z
• KURNIAWATI, M.A. (2020). The role of ICT infrastructure, innovation and globalization on economic growth in OECD countries, 1996-2017. Journal of Science and Technology Policy Management, 11(2), 193-215. doi:10.1108/JSTPM-06-2019-0065
• LEVINE, R. (1197). Financial Development and Economic Growth: Views and Agenda. Journal of Economic Literature , 35(2), 688-726.
• LIANG, H. Y. & REICHERT, A. (2006). The relationship between economic growth and banking sector development. Banks and Bank Systems, 1(2), 19-35.
• MENSI, W., HAMMOUDEH, S., TIWARI, A. K. & AL-YAHYAEE, K. H. (2020). Impact of Islamic banking development and major macroeconomic variables on economic growth for Islamic countries: Evidence from panel smooth transition models. Economic Systems, 44(1), 1-14. doi:10.1016/j.ecosys.2019.100739
• MHADHBI, K., TERZI, C. & BOUCHRIKA, A. (2020). Banking sector development and economic growth in developing countries: a bootstrap panel Granger causality analysis. Empirical Economics, 58, 2817-2836. https://doi.org/10.1007/s00181-019-01670-z
• NASREEN, S., MAHALIK, M. K., SHAHBAZ, M. & ABBAS, Q. (2020). How do financial globalization, institutions and economic growth impact financial sector development in European countries?. Research in International Business and Finance, 54, 1-25. doi:10.1016/j.ribaf.2020.101247
• NETO, D. G. & VEIGA, F. J. (2013). Financial globalization, convergence and growth: The role of foreign direct investment. Journal of International Modey and Finance, 37, 161-186. doi:10.1016/j.jimonfin.2013.04.005
• NGUYEN, P.T. (2022). The Impact of Banking Sector Development on Economic Growth: The Case of Vietnam’s Transitional Economy. Journal of Risk and Financial Management, 15(358), 1-18. https://doi.org/10.3390/jrfm15080358
• NISSANKE, M. & STEIN, H. (2003). Financial globalization and economic develop-ment: Toward an Institutional Foundation. Eastern Economic Journal, 29(2), 287-308.
• OBIORA, S. C., ZENG, Y., LI, Q., LIU, H. ADJEI, P. D. & CSORDAS, T. (2022). The effect of economic growth on banking system performance: An interregional and comparative study of Sub-Saharan Africa and developed economies. Economic Systems, 46(1). doi:10.1016/j.ecosys.2022.100939
• OFORI-ABEBRESE, G., PICKSON, R.B. & DIABAH, B.T. (2017). Financial development and economic growth: Additional evidence from Ghana. Modern Economy, 8, 282-297. https://doi.org/10.4236/me.2017.82020
• OLIVEIRA, H.V.E. & MOUTINHO, V. (2022). Do renewable, non-renewable energy, carbon emission and KOF globalization influencing economic growth? Evidence from BRICS’ countries. Energy Reports, 8, 48-53. https://doi.org/10.1016/j.egyr.2022.01.031
• PEDRONI, P. (2000). Fully-modified OLS for heterogeneous cointegrated panels. Advances in Econometrics, 15, 93-130.
• PEDRONI, P. (2001). Purchasing Power Parity Tests in Cointegrated Panels. Review of Economics and Statistics, 83, 727-731.
• PEDRONI, (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory, 20, 597–625. https://www.jstor.org/stable/3533533
• PESARAN, M.H. (2004). General diagnostic tests for cross section dependence in panels. IZA Discussion Paper, 1240.
• PESARAN, M.H. (2007). A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics, 22, 265-312. doi:10.1002/jae.951
• PETKOVSKIA, M. & KJOSEVSKI, J. (2014). Does banking sector development promote economic growth? An empirical analysis for selected countries in Central and South Eastern Europe. Economic Research-Ekonomska Istraživanja, 27(1), 55-66. doi:10.1080/1331677X.2014.947107
• PRADHAN, R. P., ARVIN, M. B., HALL, J. H. & BAHMANI, S. (2014a). Causal nexus between economic growth, banking sector development, stock market development, and other macroeconomic variables: The case of ASEAN countries. Review of Financial Economics, 23(4), 155-173. https://doi.org/10.1016/j.rfe.2014.07.002
• PRADHAN, R. B., ARVIN, M. B., NORMAN, N. R. & NISHIGAKI, Y. (2014b). Does banking sector development affect economic growth and inflation? A panel cointegration and causality approach. Applied Financial Economics, 24(7), 465-480. doi:10.1080/09603107.2014.881968
• PRADHAN, R. P., TRIPATHY, S., CHATTERJEE, D., ZAKI, D. B. & MUKHOPADHYAY, B. (2014c). Development of banking sector and economic growth: the ARF experience. Decision, 41(3), 245-259.
• PRADHAN, R. P., ARVIN, M. B. & HALL, J. H. (2019). The nexus between economic growth, stock market depth, trade openness, and foreign direct investment: The case of ASEAN countries. The Singapore Economic Review, 64(3), 461-493.
• PRADHAN, R. P., ARVIN, M. B., NAIR, M., HALL, J. H. & GUPTA, A. (2017). Is there a link between economic growth and insurance and banking sector activities in the G-20 countries?. Review of Financial Economics, 33, 12-28. doi:10.1016/j.rfe.2017.02.002
• PRASAD, E. S., ROGOFF, K., WEI, S. J. & KOSE, M. A. (2003). Effects of financial globalization on developing countries: Some empirical evidence. International Monetary Fund.
• SAHOO, M. & SETHI, N. (2020). An Empirical Insight into the financial globalization-growth nexus via trade openness: Evidence from select South Asian countries. Global Business Review, 1-18.
• SAMOUR, A., MOYO, D. & TURSOY, T. (2022). Renewable energy, banking sector development, and carbon dioxide emissions nexus: A path toward sustainable development in South Africa. Renewable Energy, 193, 1032-1040. https://doi.org/10.1016/j.renene.2022.05.013
• SARKODIE, S.A. & ADAMS, S. (2020). Electricity access, human development index, governance and income inequality in Sub-Saharan Africa. Energy Rep., 6, 455-466. doi:10.1016/j.egyr.2020.02.009
• SCHULARICK, M. & STEGER, T. M. (2010). Financial integration, investment, and economic growth: Evidence from two eras of financial globalization. The Review of Economics and Statistics, 92(4), 756-768.
• SETHI, P., CHAKRABARTI, D. & BHATTACHARJEE, S. (2020). Globalization, financial development and economic growth: Perils on the environmental sustainability of an emerging economy. Journal of Policy Modeling, 42, 520-535. doi:10.1016/j.jpolmod.2020.01.007
• SHAHID, A., SAEED, H. & TIRMIZI, S. M. A. (2015). Economic development and banking sector growth in Pakistan. Journal of Sustainable Finance & Investment, 5(3), 121-135. doi:10.1080/20430795.2015.1063976
• STEWART, R. & CHOWDHURY, M. (2021). Banking sector distress and economic growth resilience: Asymmetric effects. The Journal of Economic Asymmetries, 24(e00218), 1-11. doi:10.1016/j.jeca.2021.e00218
• STULZ, R. M. (2005). The Limits of Financial Globalization. The Journal of Finance, 60(4), 1595-1638.
• SUN, Y., AK, A., SERENER, B. & XIONG, D. (2020). Natural resource abundance and financial development: A case study of emerging seven (E 7) economies. Resources Policy, 67, 1-8. doi:10.1016/j.resourpol.2020.101660.
• TABASH, M.I. (2019). Banking sector performance and economic growth: An empirical evidence of UAE Islamic Banks. Creative Business and Social Innovations for a Sustainable Future, Springer.
• TONGURAI, J. & VITHESSONTHI, C. (2018). The impact of the banking sector on economic structure and growth. International Review of Financial Analysis, 56, 193-207. doi:10.1016/j.irfa.2018.01.002
• TURGUT, A. & ERTAY, H. İ. (2016). Bankacılık sektörünün ekonomik büyüme üzerindeki etkisi: Türkiye üzerine nedensellik analizi. Aksaray Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 8(4), 114-128.
• UNEZE, E. (2013). The relation between capital formation and economic growth: evidence from sub-Saharan African countries. Journal of Economic Policy Reform, 16(3), 272-286. doi:10.1080/17487870.2013.799916
• USMAN, M., JAHANGER, A., MAKHDUM, M. S. A. BALSALOBRE-LORENTE, D. & BASHIR, A. (2022). How do financial development, energy consumption, natural resources, and globalization affect Arctic countries' economic growth and environmental quality? An advanced panel data simulation. Energy, 241. doi:10.1016/j.energy.2021.122515
• WESTERLUND, J. (2007). Testing for Error Correction in Panel Data. Oxford Bulletin of Economics and Statistics, 69, 709-748
• YEYATI, E. L. & WILLIAMS, T. (2014). Financial globalization in emerging Economies: Much ado about nothing?. Economía, 14(2), 91-131.
• ZEQIRAJ, V., HAMMOUDEH, S., ISKENDEROGLU, O. & TIWARI, A.K. (2020). Banking sector performance and economic growth: evidence from Southeast European countries. Post-Communist Economies, 32(2), 267-284. https://doi.org/10.1080/14631377.2019.1640988
• XU, X., ABBAS, H.S.M., SUN, C., GILLANI, S., ULLAH, A. & RAZA, M.A.A. (2021). Impact of globalization and governance determinants on economic growth: An empirical analysis of Asian economies. Growth and Change, 52(2), 1137-1154. https://doi.org/10.1111/grow.12475