Empirical studies show that financial development exhibits a positive relationship with economic growth and the extent of poverty alleviation. Implementing policies that best promote financial development - such as mobilizing savings - are therefore, a matter of importance for all developing countries. A recent theoretical proposal that draws inspiration from the East Asian development experience hypothesises that by regulating to augment bank franchise values (i.e. the capitalized value of expected future profits accruing to banks), more savings can be mobilized compared with pursuing liberalization policies. This article provides an empirical test of this theory using a panel data set that covers 101 countries over the period 1994 to 2001. The results are not supportive of the theoretical proposal. In commenting on this result, it is noted that while intervening in the financial sector might not boost the aggregate quantity of savings mobilized, liberalization policies in developing countries should not necessarily be expedited, as other considerations are also clearly relevant.
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Article provided by Taylor and Francis Journals in its journal Applied Economics.
Volume (Year): 39 (2007) Issue (Month): 4 () Pages: 519-525 Download reference. The following formats are available: HTML,
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