Impacts of openness on financial development in developing countries: Using a Bayesian model averaging approach

Thuy, Diem Pham Thi; Trong, Hoai Nguyen

doi:10.1080/23322039.2021.1937848

Cited by 16 publications

(2 citation statements)

References 59 publications

(122 reference statements)

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“…Thi Thuy and Nguyen Trong (2021) used Bayesian model averaging to explore the effects of trade and financial openness on financial development across 64 developing nations from 2003 to 2017. They found that stronger institutions in developing nations amplify the impact of trade openness on financial development, while financial openness marginally influences financial progress.…”

Section: Review Of Related Literaturementioning

confidence: 99%

Role of financial openness in Ghana’s financial sector development episode

Eduboah

2024

JFEP

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Purpose This paper aims to reexamine the relationship between financial openness and financial development in Ghana. Design/methodology/approach The study applied maximum likelihood estimation and autoregressive distributed lag approach and tested Granger causality using quarterly data from 1990:1 to 2020:4. Findings This study revealed a long-run equilibrium relationship between financial openness and development, indicating that financial openness is a critical factor in Ghana’s financial development. Therefore, the study recommends with caution that policies aimed at promoting financial openness could be an effective way to encourage sustainable financial development in Ghana, as financial openness alone may not bring the desired outcome. Research limitations/implications The study contributes to the existing body of knowledge by providing empirical evidence of the link between financial openness and financial sector development in Ghana. Future research could delve deeper into the mechanisms through which financial openness affects financial development, exploring potential channels and transmission mechanisms. Practical implications The findings suggest that policymakers, particularly the Ministry of Finance and the Bank of Ghana, should prioritize policies aimed at promoting financial openness. This includes continued efforts toward financial liberalization and creating an environment conducive to domestic and international financial transactions. Moreover, policies aimed at increasing trade openness, boosting real GDP and maintaining moderate real interest rates are essential for fostering financial sector development. Social implications Enhancing financial sector development can have significant implications for society, including increased access to financial services, improved economic opportunities and enhanced overall economic stability. By promoting financial openness and development, policymakers would contribute to poverty reduction, job creation and overall socio-economic development. The study bridges the gap between theory and practice by providing empirical evidence supporting the theoretical proposition that financial openness stimulates financial sector development. Originality/value This study fills a crucial gap in the literature on the effects of financial openness on Ghana’s financial sector development. It focuses on Ghana, which liberalized its financial sector in 1988 as part of the overall economic reforms in 1983, and this justifies the starting point of this paper in 1990, as there are no adequate data before 1990. The study uses principal component analysis to construct an index that measures financial development. The study considers the recent financial crises in Ghana in 2017 and underscores the importance of understanding the link between financial openness and financial development, which becomes useful for policymakers and researchers studying financial system development in sub-Saharan Africa which includes Ghana.

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Section: Review Of Related Literaturementioning

confidence: 99%

Role of financial openness in Ghana’s financial sector development episode

Eduboah

2024

JFEP

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“…In contrast to the earlier positionsFrancois et al (2022);Ahmed and Agha (2021) show that FD has no significant relationship with FDI as such, an effect on the FDI will not affect the FD of the economy.Trade openness (TO) is another area of globalization that has received a lot of attention recently. Several studies (such asDauda & Alhaji, 2023; John & Kyalos, 2022;Tran & Huynh, 2022;Lin et al, 2022;Lawrence & Ashenafi, (2021;Majeed et al, 2021;Ahmed & Osman, 2021;Lawrence & Ashenafi, 2021;Farah, 2020;Diem & Hoai, 2021;Ebenezer et al, 2019; Hatem & Mohamed, 2014) have indicated a direct and significant relationship between trade…”

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confidence: 99%

Globalization and Financial Development in Africa

Lotsi,

Muritala,

Akande

et al. 2024

J. Professional Business Review

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Objective: Given the relevance of globalization on the integration of a country to the global economy and financial development, it is important to investigate the concept of globalization and evaluating the relationship between their determinants. Method: this study adopts qualitative techniques to examine the conceptual inter-relationship and the theoretical and empirical analysis of globalization and financial development from 2013 to 2023 using groupings based on the findings from the various samples articles that met the selection criteria of the dimensions of the concepts. On the other hand, this study adopts quantitative techniques to examine the relationship and causal effects of globalization dimension on financial development using some selected economies (developed and developing) for a period of 5 years (i.e. 2017 – 2021). Results: The finding of this study reveals that several studies have been conducted in relation to globalization and financial development, but at a decreasing rate which is against the expected results. Also, despite the increasing role of socio-economic variables of international crises, exchange rate and interest rate in financial development of economies, majority of the literatures have not shown sufficient interest as the few available reveal inconsistence in the relationship and causal effects of the variables. However, empirically, this study reveals that foreign direct investment, trade openness, exchange rate and interest rate but international crises have causal effect on financial development. Conclusion: This study therefore concludes that despite there are no convenient and consistent understandings, globalization has effect on financial development.

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