Re-examining the financial development and poverty nexus: some international evidence

Purpose - The purpose of this paper is to test the impact of financial development (FD) indicators, namely banking and stock market (SM) indicators, on the household final consumption expenditure as a poverty index. Design/methodology/approach - The authors study an international sample of 138 countries over the period 1980-2014. A series of estimation methods are used on different measures of bank-based and stock-based FD. Subgroups of countries, namely low, middle, upper-middle and high-income countries are also investigated. Findings - In the study, the authors concluded that FD fails to reach the poorest segments of each society in the international sample. For the selected subgroups of countries, the authors concluded that the impact of the bank and the SM indicators, on the poorest population segments, changes depending on, the estimated FD variables, the selected group of countries and the adopted estimation technique. Practical implications - The present study recommends appropriate economic and financial reforms, with focus on the roles of banks and SM roles to reduce poverty and stimulate channels that allow the poorest population to exploit from financial services. Originality/value - This paper is the first of its kind to empirically examine, separately, the impact of banks development and SM development, on an international panel and subgroups of countries, using modern econometric techniques.