Financial development, real sector, and economic growth

Ductor, Lorenzo; Grechyna, Daryna

doi:10.1016/j.iref.2015.01.001

Cited by 246 publications

(171 citation statements)

References 52 publications

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“…Recent literature suggests economic and financial development go hand in hand, and there is always an optimal level of bank credit to the private sector consistent with the level of economic development. Excessive bank credit to the private sector, beyond the optimal level and accompanied with lower credit standards, just accumulates higher financial sector risks (Cecchetti and Kharroubi 2012;Ductor and Grechyna 2015). Consistent with this literature, a number of recent studies have found that the likelihood that a financial crisis would occur in a country is higher when the private credit to GDP ratio is larger (Borio and Drehmann 2009;JordÀ et al 2013).…”

Section: Introductionmentioning

confidence: 87%

Trade Openness and Bank Risk-Taking Behavior: Evidence from Emerging Economies

Ashraf

Arshad

Liang

2017

JRFM

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Abstract:In this paper, we examine the impact of trade openness on bank risk-taking behavior. Using a panel dataset of 291 banks from 37 emerging countries over the period from 1998 to 2012, we find that higher trade openness decreases bank risk-taking. The results are robust when we use alternative bank risk-taking proxies and alternative estimation methods. We argue that trade openness provides diversification opportunities to banks in lending activities, which decrease overall bank risk. Further to this end, we observe that higher trade openness helps domestic banks to smooth out income volatility and decreases the impact of a financial crisis on banks.

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Section: Introductionmentioning

confidence: 87%

Trade Openness and Bank Risk-Taking Behavior: Evidence from Emerging Economies

Ashraf

Arshad

Liang

2017

JRFM

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“…This school of thought believes that better financial system increases the chances of successful innovation which provokes increase in economic growth (Ahmed & Wahid, 2010;Bojanic, 2012;Ductor & Grechyna, 2015;Khoutem, Boujelbene, & Helali, 2014;King & Levine, 1993).…”

Section: Finance-growth Nexusmentioning

confidence: 99%

Economic growth, financial development and trade openness in Nigeria: An application of the ARDL bound testing approach

Lawal

Nwanji

Asaleye

et al. 2016

Cogent Economics & Finance

106

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For over a decade now, various efforts have been put in place by various governments of the developing economies to promote economic growth, financial development and expand trade with mixed results. The ability of financial development and/or trade openness to influence economic growth in the developing economies has been a subject of hot debate and remains inconclusive. While a number of scholars are of the view that compelling cointegration exists among each of these constructs, another set of substantial authors have documented that economic growth, trade openness and financial development do evolve independent of each other. Drawing from four financial developments-growth nexus theories, this study used the ARDL bound estimation techniques to examine the existence of cointegration among economic growth, financial development and trade openness in Nigeria. We intend to know what policy instruments need to be manipulated so as to achieve economic growth and financial stability. Our results show that a two-way cointegration exists between economic growth and financial development, on the one hand, as well as between economic growth and trade openness, on the other hand. We therefore recommend that in order to achieve economic growth, policymakers should pursue strong financial development and increase trade openness.

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“…Levine, 1997;Beck et al, 2000;Goodhart, 2004;Darrat et al, 2006;Guariglia and Poncet, 2008;Ductor and Grechyna, 2015). The frontier of the literature in this field is shifting towards an examination of the sources of financial development from the perspectives of financial liberalization (McKinnon, 1973), legal systems financial openness on financial development in assessing the simultaneous openness hypothesis.…”

Section: Introductionmentioning

confidence: 99%