Research Article
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Year 2021, , 36 - 46, 30.03.2021

Tuba Gulcemal

https://doi.org/10.17261/Pressacademia.2021.1382

Abstract

References

  • Acemoglu, D., Johnson, S. and Robinson, J.A. (2001). The Colonial Origins of Comparative Development: An Empirical Investigation. American Economic Review, 91(5): 1369 – 1401
  • Acemoglu, D., Johnson, S. and Robinson, J.A. (2005). Institutions as the Fundamental Cause of Long-Run Growth, in: Philippe Aghion and Steven Durlauf (ed.), Handbook of Economic Growth, Edition 1, Volume 1, Chapter 6: 385-472. Elsevier, North Holland.
  • Acemoglu, D. and Robinson, J. (2006). De Facto Political Power and Institutional Persistence. American Economic Review, 96(2): 325-330.
  • Baltagi, Badi H. (2011). Econometrics. (5th Edition)Springer Heidelberg Dordrecht, London, New York. DOI 10.1007/978-3-642-20059-5.
  • Barro, R.J. (1996). Democracy and growth. Journal of Economic Growth,1,1-27. https://doi.org/10.1007/BF00163340
  • Baum, Christopher F. (2014). Dynamic Panel Data Estimators, EC 823: Applied Econometrics. Boston College. https://www.bc.edu/ECC/S2014/823/EC823.S2014.nn05.slides.pdf
  • Bekaert, G., Campbell R. Harvey, Christian Lundblad (2005). Does financial liberalization spur growth? Journal of Financial Economics,77(1), Pages 3-55, ISSN 0304-405X. https://doi.org/10.1016/j.jfineco.2004.05.007.
  • Bhattacharyya, S. y Hodler, R. (2014). Do Natural Resource Revenues Hinder Financial Development? The Role of Political Institutions, World Development, 57 (C), 101-113DOI: 10.1016/j.worlddev.2013.12.003
  • Chen J. and Quang, T. (2014). The impact of international financial integration on economic growth: new evidence on threshold effects. Economic Modelling, 42, pp. 475-489, 10.1016/j.econmod.2014.06.011
  • Cherif, M., Gazdar, K. (2010). Macroeconomic and Institutional Determinants of Stock Market Development in MENA Region New Results from a Panel Data Analysis. International Journal of Banking and Finance, Vol. 7, No. 1, pp. 139-159.
  • Chong, A. and Calderón, C. (2000). Institutional Quality and Income Distribution. Economic Development and Cultural Change, 48 (4), 761-786. https://doi.org/10.1086/452476
  • Coeurdacier, N. and Rey, H., Winant, P. (2020). Financial integration and growth in a risky World. Journal of Monetary Economics,112,1–21. https://doi.org/10.1016/j.jmoneco.2019.01.022
  • Dreher, A. (2006). Does globalization affect growth? Evidence from a new index of globalization. Applied Economics, 38(10), 1091–1110.
  • Dreher, A., Gaston, N. and Martens, P. (2008). Measuring globalisation - gauging its consequences. New York: Springer
  • Dumitrescu, E.-I. and Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4),1450-1460. https://doi.org/10.1016/j.econmod.2012.02.014
  • Demetrio, E. and García, T. (2012). Financial globalization and financial development in transition countries. Economía teoría y práctica, (36), 155-178. http://www.scielo.org.mx/scielo.php?script=sci_arttext&pid=S0188-33802012000100007&lng=es&tlng=en.
  • Demetriades, P. and Law, S.H.(2004). Finance, Institutions and Economic Growth. University of Leicester, Working paper No.04/5
  • Filippidis, I. and Katrakilidis, C. (2014). Institutions, policy and banking sector development: A reassessment. Czech Journal of Economics and Finance, 82(2), 93-208.
  • Gurley, J. and Shaw, E. (1967). Financial Structure and Economic Development. Economic Development and Culture Change, 15, 257-268.
  • https://doi.org/10.1086/450226 .......................................................................................
  • Gygli, S., Haelg, F., Potrafke, N. and Sturm, J.E. (2019). The KOF Globalisation Index – Revisited. The Review of International Organizations, 14(3), 543-574. https://doi.org/10.1007/s11558-019-09344-2.
  • Kavya, T. B. and Shijin, S. (2020). Economic development, financial development, and income inequality nexus. Borsa Istanbul Review, 20(1), 80–93. https://doi.org/10.1016/j.bir.2019.12.002
  • Khalfaoui, H.(2015). The Determinants of Financial Development: Empirical Evidence from Developed and Developing Countries. Applied Economics and Finance, 2(4),1-9.URL: http://aef.redfame.com
  • Khan, M.A., Khan, M.A, Abdulahi, M.E. , Liaqat, I. , Shah, S.S.H. (2019). Institutional quality and financial development: the United States perspective. Journal of Multinational Financial Management, Volume 49, pp. 67-80.
  • Kosolapov, N.A.(2001). The international political organization of the globalized world: models for a medium-term prospect. Social Sciences and Modernity, 6, 141-143.
  • La Porta, R., Lopez‐De‐Silanes, F., Shleifer, A. and Vishny, R. (2002). Investor Protection and Corporate Valuation. The Journal of Finance, 57:1147-1170. https://doi.org/10.1111/1540-6261.00457
  • Law, S. H., Kutan, Ali M., Naseem N.A.M. (2018). The role of institutions in finance curse: Evidence from international data. Journal of Comparative Economics, 46 (1), 174-191, ISSN 0147-5967. https://doi.org/10.1016/j.jce.2017.04.001.
  • Le, Hoang P. (2020). The energy-growth nexus revisited: the role of financial development, institutions, government expenditure and trade openness. Heliyon, 6(7),1-11. https://doi.org/10.1016/J.HELIYON.2020.E04369
  • Levin, R., Loayze, N., Beck, T., (2000). Financial intermediation and growth: causality and causes. Journal of Monetary Economics, 46 (1), 31–77. https://doi.org/10.1016/S0304-3932(00)00017-9.
  • Lipset, S., M. (1959). Requisites of democracy: Economic Development and political legitimacy. The American Political Science Review, 53 (1), 69-105.
  • Luo, Y., Zhang, C., Zhu, Y. (2016). Openness and financial development in China: the political economy of financial resources distribution. Emerging Markets Finance and Trade, 52(9),2115–2127. https://doi.org/10.1080/1540496X.2016.1186451
  • Mishkin, Frederic S. (2009). Globalization and financial development. Journal of DevelopmentEconomics,89(2),164-169,ISSN0304-3878, https://doi.org/10.1016/j.jdeveco.2007.11.004.
  • Muye, I.M. and Muye, I.Y. (2017).Testing for causality among globalization, institution and financial development: further evidence from three economic blocs. Borsa Istanbul Rev. 17 (2), pp. 117-132.
  • Nasreen, S., Mahalik, M. K, Shahbaz, M. and Abbas, Q. (2020). How do financial globalization, institutions and economic growth impact financial sector development in European countries? Research in International Business and Finance, Volume 54, 101247, ISSN 0275-5319, https://doi.org/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 Money and Finance, 37, 161-186. http://refhub.elsevier.com/S0275-5319(19)30059-5/sbref0275
  • Odhiambo, N.M. (2011). Financial intermediaries versus financial markets: A South African experience. International Business and Economics Research Journal, 10 (2), 7784. https://doi.org/10.19030/iber.v10i2.1795.
  • Patrick, H. (1966). Financial development and economic growth in underdeveloped countries. Economic Development and Cultural Change, 14(6): 174-189.
  • Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels. Cambridge Working Papers in Economics 0435, 3, 1–39. doi:https://doi.org/https://ideas.repec.org/p/cam/camdae/0435.html
  • Prasad, E., Rajan, R. and Subramanian, A.(2007). The Paradox of Capital. Finance and Development, A quarterly magazine of the IMF, 44(1). https://www.imf.org/external/pubs/ft/fandd/2007/03/prasad.htm
  • Rajan, R. and Zingales, L. (2003). Banks and Markets: The Changing Character of European Finance. National Bureau of Economic Research Working Paper, No. 9595. http://www.nber.org/papers/w9595.
  • Rey, H. (2013). Dilemma not Trilemma: The Global Cycle and Monetary Policy Independence. Economic Policy Symposium Background Paper. Federal Reserve Bank of Kansas City, Jackson Hole, WY.
  • Rodrik, D.(1997). ìTFPG Controversies, Institutions and Economic Performance in East Asia. î National Bureau of Economic Research Working Paper: 5914.
  • Roodman, D. (2006) revised (2008). How to Do xtabond2: An Introduction to Difference and System GMM in Stata. Center for Global Development, Working Paper Number 103,pp.1-50. http://dx.doi.org/10.2139/ssrn.982943.
  • Ruiz, J. L.(2018). Financial development, institutional investors, and economic growth. International Review of Economics and Finance, 54,218-224. doi:10.1016/j.iref.2017.08.009.
  • Schumpeter, J.A. (1912). The Theory of Economic Development (2004 version), Transaction Publishers, New Brunswick, New Jersey.
  • Şamiloğlu, F., and Savaş, B. (2010). Financial Development and Economic Growth in Turkey: An ARDL Bounds Testing Approach. Çankırı Karatekin Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 1, 25‐34.
  • Voghouei, H., Azali, M. and Jamali, M.A. (2011). A survey of the determinants of financial development. Asian‐Pacific Economic Literature, 25:1-20. https://doi.org/10.1111/j.1467-8411.2011.01304.x
  • Westerlund, J. (2007). Testing for error correction in panel data. Oxford Bulletin of Economics and Statistics, 69,709–748. doi:10.1111/j.1468-0084.2007.00477.x
  • Yıldız, H. and Atasaygın, S. (2015). Financial Deepening and Economic Growth: The Turkish Experience. American Journal of Economics, 5(5), 477-483.
  • https://www.morganstanley.com/public/Tales_from_the_Emerging_World_Fragile_Five.pdf
  • https://www.imf.org/en/Publications/ESR/Issues/2020/07/28/2020-externalsectorreport
  • https://www.fraserinstitute.org/studies/economic-freedom-of-the-world-2019-annual-report
  • https://ethz.ch/content/dam/ethz/specialinterest/dual/kofdam/documents/Globalization/2019/KOFGI_2019_variables.pdf

FINANCIAL GLOBALIZATION, INSTITUTIONS AND ECONOMIC GROWTH IMPACT ON FINANCIAL SECTOR DEVELOPMENT IN FRAGILE COUNTRIES USING GMM ESTIMATOR

Year 2021, , 36 - 46, 30.03.2021

Tuba Gulcemal

https://doi.org/10.17261/Pressacademia.2021.1382

Abstract

Purpose- The aim of the research is to predict the impact of financial globalization, institutional quality and economic growth on financial development in fragile economies. In this paper the panel data consists of Turkey, Brazil, India, South Africa, Indonesia, Argentina, Egypt, Pakistan’s annual data from 1995-2017.
Methodology –System GMM dynamic panel data approach has been applied to deal with simultaneity bias and endogeneity bias when the explanatory variable is correlated with the residual disturbance term. The System GMM estimator combines regression in differences with regression in levels to get rid of the individual specific effects and along with it any time invariant regressor. The models are estimated by using one step system GMM estimator in other words Arellano and Bover /Blundell and Bond System Generalized Moments Method.
Findings- The results show that economic growth and financial development are positively related. Thanks to financial development interest rates can be determined by market conditions and financial intermediaries can minimize transaction costs and information acquisition costs can be minimized. Empirical findings suggest policy guidelines for developing financial sector by using economic growth as an economic instrument.
Conclusion- The paper concludes that economic growth have significant impact on financial development so both financial institutions and financial markets development in fragile countries. For less developed countries, developments in institutions are likely to have far greater direct effects on growth than financial development itself. When the financial system is developed, Institutional improvements can also deliver more growth. Since global standards for institutions such as International Country Risk Guide, Global Government Indicators increase, it seems also developing ountries are aware of the importance of institutional quality on economic growth. The findings suggest that financial development is affected by economic growth, inflation and population in fragile countries.

Keywords

Financial development economic growth GMM dynamic panel data analysis fragile countries

References

  • Acemoglu, D., Johnson, S. and Robinson, J.A. (2001). The Colonial Origins of Comparative Development: An Empirical Investigation. American Economic Review, 91(5): 1369 – 1401
  • Acemoglu, D., Johnson, S. and Robinson, J.A. (2005). Institutions as the Fundamental Cause of Long-Run Growth, in: Philippe Aghion and Steven Durlauf (ed.), Handbook of Economic Growth, Edition 1, Volume 1, Chapter 6: 385-472. Elsevier, North Holland.
  • Acemoglu, D. and Robinson, J. (2006). De Facto Political Power and Institutional Persistence. American Economic Review, 96(2): 325-330.
  • Baltagi, Badi H. (2011). Econometrics. (5th Edition)Springer Heidelberg Dordrecht, London, New York. DOI 10.1007/978-3-642-20059-5.
  • Barro, R.J. (1996). Democracy and growth. Journal of Economic Growth,1,1-27. https://doi.org/10.1007/BF00163340
  • Baum, Christopher F. (2014). Dynamic Panel Data Estimators, EC 823: Applied Econometrics. Boston College. https://www.bc.edu/ECC/S2014/823/EC823.S2014.nn05.slides.pdf
  • Bekaert, G., Campbell R. Harvey, Christian Lundblad (2005). Does financial liberalization spur growth? Journal of Financial Economics,77(1), Pages 3-55, ISSN 0304-405X. https://doi.org/10.1016/j.jfineco.2004.05.007.
  • Bhattacharyya, S. y Hodler, R. (2014). Do Natural Resource Revenues Hinder Financial Development? The Role of Political Institutions, World Development, 57 (C), 101-113DOI: 10.1016/j.worlddev.2013.12.003
  • Chen J. and Quang, T. (2014). The impact of international financial integration on economic growth: new evidence on threshold effects. Economic Modelling, 42, pp. 475-489, 10.1016/j.econmod.2014.06.011
  • Cherif, M., Gazdar, K. (2010). Macroeconomic and Institutional Determinants of Stock Market Development in MENA Region New Results from a Panel Data Analysis. International Journal of Banking and Finance, Vol. 7, No. 1, pp. 139-159.
  • Chong, A. and Calderón, C. (2000). Institutional Quality and Income Distribution. Economic Development and Cultural Change, 48 (4), 761-786. https://doi.org/10.1086/452476
  • Coeurdacier, N. and Rey, H., Winant, P. (2020). Financial integration and growth in a risky World. Journal of Monetary Economics,112,1–21. https://doi.org/10.1016/j.jmoneco.2019.01.022
  • Dreher, A. (2006). Does globalization affect growth? Evidence from a new index of globalization. Applied Economics, 38(10), 1091–1110.
  • Dreher, A., Gaston, N. and Martens, P. (2008). Measuring globalisation - gauging its consequences. New York: Springer
  • Dumitrescu, E.-I. and Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4),1450-1460. https://doi.org/10.1016/j.econmod.2012.02.014
  • Demetrio, E. and García, T. (2012). Financial globalization and financial development in transition countries. Economía teoría y práctica, (36), 155-178. http://www.scielo.org.mx/scielo.php?script=sci_arttext&pid=S0188-33802012000100007&lng=es&tlng=en.
  • Demetriades, P. and Law, S.H.(2004). Finance, Institutions and Economic Growth. University of Leicester, Working paper No.04/5
  • Filippidis, I. and Katrakilidis, C. (2014). Institutions, policy and banking sector development: A reassessment. Czech Journal of Economics and Finance, 82(2), 93-208.
  • Gurley, J. and Shaw, E. (1967). Financial Structure and Economic Development. Economic Development and Culture Change, 15, 257-268.
  • https://doi.org/10.1086/450226 .......................................................................................
  • Gygli, S., Haelg, F., Potrafke, N. and Sturm, J.E. (2019). The KOF Globalisation Index – Revisited. The Review of International Organizations, 14(3), 543-574. https://doi.org/10.1007/s11558-019-09344-2.
  • Kavya, T. B. and Shijin, S. (2020). Economic development, financial development, and income inequality nexus. Borsa Istanbul Review, 20(1), 80–93. https://doi.org/10.1016/j.bir.2019.12.002
  • Khalfaoui, H.(2015). The Determinants of Financial Development: Empirical Evidence from Developed and Developing Countries. Applied Economics and Finance, 2(4),1-9.URL: http://aef.redfame.com
  • Khan, M.A., Khan, M.A, Abdulahi, M.E. , Liaqat, I. , Shah, S.S.H. (2019). Institutional quality and financial development: the United States perspective. Journal of Multinational Financial Management, Volume 49, pp. 67-80.
  • Kosolapov, N.A.(2001). The international political organization of the globalized world: models for a medium-term prospect. Social Sciences and Modernity, 6, 141-143.
  • La Porta, R., Lopez‐De‐Silanes, F., Shleifer, A. and Vishny, R. (2002). Investor Protection and Corporate Valuation. The Journal of Finance, 57:1147-1170. https://doi.org/10.1111/1540-6261.00457
  • Law, S. H., Kutan, Ali M., Naseem N.A.M. (2018). The role of institutions in finance curse: Evidence from international data. Journal of Comparative Economics, 46 (1), 174-191, ISSN 0147-5967. https://doi.org/10.1016/j.jce.2017.04.001.
  • Le, Hoang P. (2020). The energy-growth nexus revisited: the role of financial development, institutions, government expenditure and trade openness. Heliyon, 6(7),1-11. https://doi.org/10.1016/J.HELIYON.2020.E04369
  • Levin, R., Loayze, N., Beck, T., (2000). Financial intermediation and growth: causality and causes. Journal of Monetary Economics, 46 (1), 31–77. https://doi.org/10.1016/S0304-3932(00)00017-9.
  • Lipset, S., M. (1959). Requisites of democracy: Economic Development and political legitimacy. The American Political Science Review, 53 (1), 69-105.
  • Luo, Y., Zhang, C., Zhu, Y. (2016). Openness and financial development in China: the political economy of financial resources distribution. Emerging Markets Finance and Trade, 52(9),2115–2127. https://doi.org/10.1080/1540496X.2016.1186451
  • Mishkin, Frederic S. (2009). Globalization and financial development. Journal of DevelopmentEconomics,89(2),164-169,ISSN0304-3878, https://doi.org/10.1016/j.jdeveco.2007.11.004.
  • Muye, I.M. and Muye, I.Y. (2017).Testing for causality among globalization, institution and financial development: further evidence from three economic blocs. Borsa Istanbul Rev. 17 (2), pp. 117-132.
  • Nasreen, S., Mahalik, M. K, Shahbaz, M. and Abbas, Q. (2020). How do financial globalization, institutions and economic growth impact financial sector development in European countries? Research in International Business and Finance, Volume 54, 101247, ISSN 0275-5319, https://doi.org/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 Money and Finance, 37, 161-186. http://refhub.elsevier.com/S0275-5319(19)30059-5/sbref0275
  • Odhiambo, N.M. (2011). Financial intermediaries versus financial markets: A South African experience. International Business and Economics Research Journal, 10 (2), 7784. https://doi.org/10.19030/iber.v10i2.1795.
  • Patrick, H. (1966). Financial development and economic growth in underdeveloped countries. Economic Development and Cultural Change, 14(6): 174-189.
  • Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels. Cambridge Working Papers in Economics 0435, 3, 1–39. doi:https://doi.org/https://ideas.repec.org/p/cam/camdae/0435.html
  • Prasad, E., Rajan, R. and Subramanian, A.(2007). The Paradox of Capital. Finance and Development, A quarterly magazine of the IMF, 44(1). https://www.imf.org/external/pubs/ft/fandd/2007/03/prasad.htm
  • Rajan, R. and Zingales, L. (2003). Banks and Markets: The Changing Character of European Finance. National Bureau of Economic Research Working Paper, No. 9595. http://www.nber.org/papers/w9595.
  • Rey, H. (2013). Dilemma not Trilemma: The Global Cycle and Monetary Policy Independence. Economic Policy Symposium Background Paper. Federal Reserve Bank of Kansas City, Jackson Hole, WY.
  • Rodrik, D.(1997). ìTFPG Controversies, Institutions and Economic Performance in East Asia. î National Bureau of Economic Research Working Paper: 5914.
  • Roodman, D. (2006) revised (2008). How to Do xtabond2: An Introduction to Difference and System GMM in Stata. Center for Global Development, Working Paper Number 103,pp.1-50. http://dx.doi.org/10.2139/ssrn.982943.
  • Ruiz, J. L.(2018). Financial development, institutional investors, and economic growth. International Review of Economics and Finance, 54,218-224. doi:10.1016/j.iref.2017.08.009.
  • Schumpeter, J.A. (1912). The Theory of Economic Development (2004 version), Transaction Publishers, New Brunswick, New Jersey.
  • Şamiloğlu, F., and Savaş, B. (2010). Financial Development and Economic Growth in Turkey: An ARDL Bounds Testing Approach. Çankırı Karatekin Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 1, 25‐34.
  • Voghouei, H., Azali, M. and Jamali, M.A. (2011). A survey of the determinants of financial development. Asian‐Pacific Economic Literature, 25:1-20. https://doi.org/10.1111/j.1467-8411.2011.01304.x
  • Westerlund, J. (2007). Testing for error correction in panel data. Oxford Bulletin of Economics and Statistics, 69,709–748. doi:10.1111/j.1468-0084.2007.00477.x
  • Yıldız, H. and Atasaygın, S. (2015). Financial Deepening and Economic Growth: The Turkish Experience. American Journal of Economics, 5(5), 477-483.
  • https://www.morganstanley.com/public/Tales_from_the_Emerging_World_Fragile_Five.pdf
  • https://www.imf.org/en/Publications/ESR/Issues/2020/07/28/2020-externalsectorreport
  • https://www.fraserinstitute.org/studies/economic-freedom-of-the-world-2019-annual-report
  • https://ethz.ch/content/dam/ethz/specialinterest/dual/kofdam/documents/Globalization/2019/KOFGI_2019_variables.pdf
There are 53 citations in total.

Details

Primary Language English
Subjects Finance, Business Administration
Journal Section Articles
Authors

Tuba Gulcemal This is me 0000-0003-4806-8568

Publication Date March 30, 2021
Published in Issue Year 2021

Cite

APA Gulcemal, T. (2021). FINANCIAL GLOBALIZATION, INSTITUTIONS AND ECONOMIC GROWTH IMPACT ON FINANCIAL SECTOR DEVELOPMENT IN FRAGILE COUNTRIES USING GMM ESTIMATOR. Journal of Business Economics and Finance, 10(1), 36-46. https://doi.org/10.17261/Pressacademia.2021.1382

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