The nexus between financial development and poverty reduction in Egypt

Abstract

Purpose-The purpose of this study is to empirically examine the impact of financial development on poverty reduction in Egypt. The paper also investigates whether financial development affects poverty via gross domestic product (GDP) growth. Design/methodology/approach-This study uses the autoregressive distributed lag approach to estimate two specifications. The first is dependent on poverty by the ratio domestic credit to the private sector (percentage of GDP) and the second is dependent on the poverty by the ratio liquid liabilities to GDP or M3/GDP. The data are annual and cover the period from 1980 to 2015. Findings-In long run, the study finds that relationship between economic growth and poverty is bidirectional. Financial development and poverty (household final consumption expenditure per capita) are complementary as bidirectional (in Granger sense). In short run, the study finds the bidirectional causality between financial development (real domestic credit to private sector per capita) and poverty reduction. Practical implications-The findings suggest that governments should remove policies that impede the ability of banks to offer loan products or undermine the commercial incentive structure for banks or borrowers. It is crucial to enhance the role of specialized state-owned banks in financial intermediation. Social implications-Several attempts have been made to investigate the relationship between financial development and other macroeconomic variables, but few studies have examined the impact of financial development on poverty reduction. Furthermore, the majority of the previous studies are based on Asia and Latin Americaaffording Egypt very little or no coverage at all.

The Impact of Halal at Thayyib and Consumption Ethics Impact on Economic Growth: An Economic Tafsir Al-Baqarah:168

“…Poverty is a concern of many governments in the world because it is closely related to economic growth. Many studies also confirm that poverty is an important factor in economic growth (Kheir, 2018;Sasmal & Sasmal, 2016;Sehrawat & Giri, 2016).…”

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Investment Portfolio, Democratic Accountability, Poverty and Income Inequality Nexus in Pakistan: A Way to Social Sustainability

“…Kheir [18] investigated the impact of Financial Market Development (FMD) on poverty in Egypt. The study considered the ARDL model for the sample period from 1980 to 2015 and found the significant role of FMD and money supply in reducing Egypt's poverty.…”

Financial Development and Poverty Reduction in Bangladesh: Evidence from the ARDL Bound Testing Approach

“…Odhiambo (2009) inspects the causality among financial development, poverty, and economic growth for the data of South Africa ranging the period 1960-2006 to find that both financial development and economic growth Granger-cause poverty reduction in the country. Kheir (2018), using the data covering the period 1980-2015, finds for another African nation, namely Egypt, that there exists bi-directional causality between financial development and poverty reduction both in the short-run and long run. The study uses the ratio of household final consumption expenditures to GDP as a proxy for poverty data.…”

“…The present study aims at unearthing the effect of financial development on poverty reduction. We formulate the following model, in line with Beck et al (2007), Odhiambo (2009), and Kheir (2018) to assess the nature of the relationship.…”