Financial development, reforms and growth

Boikos, Spyridon; Panagiotidis, Theodore; Voucharas, Georgios

doi:10.1016/j.econmod.2021.105734

Cited by 34 publications

(20 citation statements)

References 51 publications

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“…Banking sector reforms are not always repressive in terms of being restrictive of banking activities such as activity restriction (Claessens and Klingebiel, 2000) and entry restrictions (Paseda, 2012;Keeley, 1990); they may also come in form of liberalising and deregulating the operations of the banking/financial system (Boikos et al, 2021;Ezeocha, 2020;Moyo, 2014) to accommodate its financial intermediation role and auspice its support for economic growth. Whether restrictive or liberalising, the success of a reform in terms of intended results and effects on the economy depends on many factors including, but not limited to, careful planning and implementation as well as congruence and congeniality to the country's level of economic and financial system development (Lee, 2006).…”

Section: Brief Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

“…The empirically established role of an efficient financial system in economic growth and development (Boikos et al , 2021; Sahay et al , 2015; Levine, 2005; Arestis and Demetriades, 1997; King and Levine, 1993) underpins clamour for, and implementation of, financial sector reforms across the globe (Barth et al , 2001), especially in emerging market economies (Bhaumik et al , 2017) like Nigeria. Reforms (and regulations) in the banking sector are however more prevalent than other sectors (Chortareas et al , 2012; Guiso et al , 2006; Barth et al , 2013), not only due to the sector’s dominant role in the financial system functioning (Bhaumik et al , 2017; Mihaljek, 2010; Abiad et al , 2010; Barth et al , 2002) and economic growth (Idris, 2014; Levine, 1997) but also for its uniqueness in terms of higher level of information asymmetry relative to other sectors (Alley, 2022; Barth and Caprio, 2018; Freixas and Santomero, 2003).…”

Section: Introductionmentioning

confidence: 99%

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Banking sector reforms in Nigeria: an empirical appraisal

Alley¹,

Hassan²,

Ahmad³

et al. 2023

JFRC

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Purpose This paper provides evidence that the banking sector reforms of 2004 and 2009 enhanced prudential performance of the banking industry and financial system stability in Nigeria. Design/methodology/approach This study uses regression analysis with regime shift to confirm results from tests of two means and variances model to examine the effectiveness of banking sector reforms in Nigeria. Findings Evidence from the regression model agrees with findings from the test of means model (not controlling for trend effects) that capital to assets ratio rose while non-performing loan ratio declined after the reforms, and that capital to earning assets ratio rose when trend effects were accounted for. Both the regression model and the tests of means model controlling for trend effects show that return on asset, return on equity and return on earning assets ratios declined after the reforms. Research limitations/implications This paper evaluated the effectiveness of banking sector reforms in Nigeria using models that avoid weaknesses that besieged many previous studies. It however used data covering 1983–2020 period, due to data availability. A larger scope of data may improve the results, and future research may re-examine this theme as more data become available. Furthermore, banking stability issues could be examined using specialised techniques such as the generalised autoregressive conditional heteroscedasticity model and related family. Practical implications These results suggest that the reforms led to improvement in the sector’s resilience (risks-absorbing capacity) and asset quality, and that profitability had not been the primary focus of the reforms. Social implications The authors recommend that regulatory and supervisory authorities in Nigeria continue to implement and improve on banking sector reforms for a more resilient and functional banking system. As a contribution to social research, this study shows that studies on policy evaluation should be located within appropriate theoretical framework: the theory of change. It shows that an appropriate use of attribution analysis and contribution analysis within this theoretical framework engenders robust analysis and results. Otherwise, the analytical findings would be erroneous and policy advice misguided. Originality/value The statistical significance of our findings establishes that the banking sector reforms in Nigeria have been effective in promoting financial system stability in Nigeria. By deploying both the test of means with and without trend effects (an attribution analysis) and the multivariate regression analysis with regulatory shift (a contribution analysis), and relying more on the later for its superiority, this study contributes to the body of knowledge in that, it not only determined the true effects of banking sector reforms in Nigeria for appropriate policy guidance but also demonstrated that, in research, an inappropriate methodology produces results that may diverge from the more accurate ones that were derived from the correct methodology.

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Section: Brief Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Banking sector reforms in Nigeria: an empirical appraisal

Alley¹,

Hassan²,

Ahmad³

et al. 2023

JFRC

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“…For example, financial development is seen not only as stimulating economic growth in emerging economies (i.e. Boikos et al, 2022;Nguyen, 2021) but also as a convergence factor; it positively affects the speed of convergence (Ranjibar and Rasseekh, 2017). The process of globalization has beneficial effects on economic growth in developing countries (i.e.…”

Section: Introductionmentioning

confidence: 99%

“…e.,Sethi et al, 2020). The role of financial development on economic growth is different across countries (e.g.,Rousseau and Wachtel, 2011) and depends on the stages of economic development (e.g.,Deidda and Fattouh, 2002;Sahay et al, 2015;Boikos et al, 2022) Naceur et al (2017). found that financial development affects the sources of growth (productivity and investment) using a sample of 145 economies over the period of 1960 to 2011, in a complex relationship.…”

mentioning

confidence: 99%

Does Financial Development, Globalisation and Institutional Quality Drive the Income Convergence in the Central and Eastern European Union Countries?

PORUMBACEAN

Anghelina

2023

Studia Universitatis „Vasile Goldis” Arad – Economics Series

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Central and Eastern European (CEE) countries are struggling with internal and external macroeconomic and social factors in their catching-up strategies to be closer, as economic wealth, to the Western developed European countries. In these ex-communist countries, institutional factors could be seen as critical for success in narrowing the income gap. The paper proposes an analysis of the impact of economic and financial development and globalization on the income gap in 11 Central and Eastern European (CEE) countries (Bulgaria, Croatia, Czechia, Estonia, Latvia, Lithuania, Poland, Romania, Slovak Republic and Slovenia) for the period of 1996 to 2019, taking into consideration institutional factors. The study analyses the variables: transition coefficient as a proxy for income gap, GDP per capita, KOF Financial Globalisation Index, Financial Development Index and World Bank Institutional Indicators in a panel approach methodology and estimation of FMOLS and DOLS equations. The paper’s findings show that all considered factors have a significant contribution to the income gap in the examined period of time. Economic and financial development, as well as institutional quality, is positively associated with the closing income gap, while globalization has a negative influence. It is also revealed the direction of the causality relationship between the considered variables: from economic and financial development, globalization and institutional quality to the income gap. These findings suggest some policy recommendations in support of the continuation of the European integration process.

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How important is tourism for growth?

Panagiotidis,

Mussoni,

Voucharas

2023

Int. J Fin Econ

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We revisit the tourism‐led growth hypothesis by utilising a panel set of 108 countries over the period 1996–2017. We quantify the effects of tourism on the entire conditional distribution of economic growth for both relatively poor and relatively rich countries within a panel quantile regression framework. We address the unobserved heterogeneity and potential endogeneity concerns. We reveal that the lower the conditional growth rate a country experiences the more important is tourism development for the conditional growth distribution for both developing and developed countries. The size of the effect in developed countries is twice as high as in developing ones. On the other hand, tourism specialisation is beneficial only at higher quantiles of the conditional growth distribution and only for developed countries. On the contrary, it brings about an undesirable effect in developing countries. Finally, we examine the impact of a reduction in tourism activity on economic growth due to an exogenous shock (i.e., COVID‐19). Simulation analysis based on the quantile regression estimates shows that countries facing relatively low growth rates conditionally to the growth distribution are affected the most. Policymakers may consider the importance of tourism activity in the growth process and formulate strategies that align with the growth experience of each country.

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Financial development, reforms and growth

Cited by 34 publications

References 51 publications

Banking sector reforms in Nigeria: an empirical appraisal

Banking sector reforms in Nigeria: an empirical appraisal

Does Financial Development, Globalisation and Institutional Quality Drive the Income Convergence in the Central and Eastern European Union Countries?

How important is tourism for growth?

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