Determinants of banking sector development in developing and emerging economies: Unveiling the role of economic growth, trade openness, and financial liberalization

Q1 Social Sciences

Banks and Bank Systems Pub Date : 2023-09-25 DOI:10.21511/bbs.18(3).2023.15

Chedlia Farhat

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引用次数: 1

Abstract

The determinants of financial development in developing and emerging economies are examined in this article. The long-term relationships between banking sector development, financial integration, trade openness, and economic growth are explored using FMOLS-DOLS panel estimations spanning from 1980 to 2021. The critical significance of economic growth, trade openness, and financial liberalization as fundamental drivers of banking system progress is underscored by the results. To investigate this relationship, two specifications are introduced to measure banking sector development: private credits (specification 1) and the ME ratio (specification 2), which is defined as the ratio of M3 to GDP. In the context of specification 1, quantitative outcomes reveal that a 1% increase in economic growth results in a substantial rise of 0.207% in banking sector development according to FMOLS, and 0.972% according to DOLS. Similarly, a 1% increase in trade openness has a noteworthy positive impact of 0.019% on banking development. Furthermore, the results indicate that financial liberalization contributes positively to banking sector development, with an effect of 0.002%. In the context of specification 2, the impact of economic growth is more pronounced, with a significant increase of 0.3187% (FMOLS) and 0.852% (DOLS). However, trade openness (TRADE_OP) manifests a negative impact of –0.392% (FMOLS) and a positive impact of 0.0162% (DOLS). In conclusion, the critical importance of economic growth, trade openness, and financial liberalization in the development of the banking sector in developing and emerging economies is underscored by the empirical evidence. Prudent economic and financial policies, along with strengthened regulation and supervision, are recommended to foster sustainable and resilient financial development in these contexts.

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发展中国家和新兴经济体银行业发展的决定因素:揭示经济增长、贸易开放和金融自由化的作用

本文探讨了发展中国家和新兴经济体金融发展的决定因素。利用1980年至2021年的FMOLS-DOLS面板估计，探讨了银行业发展、金融一体化、贸易开放和经济增长之间的长期关系。研究结果强调了经济增长、贸易开放和金融自由化作为银行体系进步的根本驱动力的重要意义。为了研究这种关系，我们引入了两个指标来衡量银行业的发展:私人信贷(指标1)和ME比率(指标2)，后者被定义为M3与GDP的比率。在规范1的背景下，量化结果显示，根据FMOLS，经济增长1%导致银行业发展大幅上升0.207%，根据DOLS，银行业发展大幅上升0.972%。同样，贸易开放程度每提高1%，对银行业发展的积极影响就显著提高0.019%。此外，研究结果表明，金融自由化对银行业的发展有积极的促进作用，其效应为0.002%。在规范2的背景下，经济增长的影响更为明显，显著增加了0.3187% (FMOLS)和0.852% (DOLS)。然而，贸易开放(TRADE_OP)的负向影响为-0.392% (FMOLS)，正向影响为0.0162% (DOLS)。总之，经济增长、贸易开放和金融自由化在发展中国家和新兴经济体银行业发展中的关键重要性得到了经验证据的强调。建议采取审慎的经济和金融政策，同时加强监管和监督，以在这些背景下促进可持续和有弹性的金融发展。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Banks and Bank Systems Social Sciences-Law

CiteScore

2.60

自引率

0.00%

发文量

审稿时长

11 weeks

期刊介绍： The journal focuses on the results of scientific researches on monetary policy issues in different countries and regions all over the world. It also analyzes the activities of international financial organizations, central banks, and bank institutions. Key topics: -Monetary Policy in Different Countries and Regions; -Monetary and Payment Systems; -International Financial Organizations and Institutions; -Monetary Policy of Central Banks; -Organizational Structure, Functions and Activities of Central Banks; -State Policy and Regulation of Banking; -Bank Competitiveness; -Banks at the Financial Markets; -Bank Associations and Conglomerates; -International Payment Systems; -Investment Banking; -Financial Risks and Risk Management in Banks; -Capital and Ownership Structure, Bankruptcy and Liquidation, Mergers and Acquisitions of Banks; -Corporate Governance and Goodwill; -Personnel Management in Banks; -Econometric, Statistical Methods; Econometric Modeling of Bank Activities; -Bank Ratings.