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Latin American Financial Development in Perspective

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Author Info

  • Alicia García Herrero

    ()
    (Banco de España)

  • Javier Santillán

    (Banco de España)

  • Sonsoles Gallego

    ()
    (Banco de España)

  • Lucía Cuadro

    ()
    (Banco de España)

  • Carlos Egea

    (Banco de España)

Abstract

This paper assesses financial sector development in Latin America, both in the banking system and in the capital markets. After a brief review of the explanatory factors and the definitions of financial development found in the literature, Latin American countries are classified in groups of similar characteristics by using cluster analysis - first worldwide and second within the region - in terms of financial depth and per capita income. In the worldwide exercise, virtually all Latin American countries appear in the same cluster, which argues in favor of a regional dimension in financial development. A comparison of the Asian and Eastern European emerging regions shows that Latin America lags behind Asia in terms of financial development and compares slightly unfavorably with Eastern Europe. In the regional cluster exercise, four relatively homogeneous groups of Latin American countries are found. Stylized facts of the four groups’ banking sectors and capital markets show - in line with the results of the more recent economic literature - that those countries which have deeper financial systems are also those with a more efficient financial system. Although no conclusions on causality can be drawn from this review, it argues in favor of a virtuous circle, in terms of financial depth and efficiency, for countries with the most appropriate structure of the financial system.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/02/Fic/dt0216e.pdf
File Function: First version, July 2002
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0216.

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Length: 71 pages
Date of creation: Jul 2002
Date of revision:
Handle: RePEc:bde:wpaper:0216

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Keywords: Financial development; Latin American financial systems; cluster analysis;

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References

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Citations

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Cited by:
  1. Dorrucci, Ettore & Firpo, Stefano & Mongelli, Francesco Paolo & Fratzscher, Marcel, 2002. "European integration: what lessons for other regions? The case of Latin America," Working Paper Series, European Central Bank 0185, European Central Bank.
  2. Thomas Gries & Manfred Kraft & Daniel Meierrieks, 2011. "Financial deepening, trade openness and economic growth in Latin America and the Caribbean," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 43(30), pages 4729-4739.
  3. repec:pdn:wpaper:17 is not listed on IDEAS
  4. Alicia Garcia-Herrero & Daniel Navia Simon, 2006. "Why Banks go to Emerging Countries and What is the Impact for the Home Economy? A Survey," Working Papers, BBVA Bank, Economic Research Department 0602, BBVA Bank, Economic Research Department.
  5. Alicia Garcia Herrero & Sonsoles Gallego Herrero & Cristina Luna Abella, 2004. "Investing In The Financial Sector Of Emerging Countries: Potential Risk And How To Manage Them," International Finance, EconWPA 0404015, EconWPA.
  6. Sonsoles Gallego & Alicia García Herrero & Jesús Saurina, 2002. "The Asian and European Banking Systems: The Case of Spain in the Quest for Develpoment and Stability," Banco de Espa�a Working Papers, Banco de Espa�a 0217, Banco de Espa�a.
  7. Carton, Christine & Ronquillo, Cely, 2008. "Determinantes del crecimiento económico e intermediación bancaria: un análisis empírico para países latinoamericanos
    [Determinants of economic growth and bank intermediation: empirical analysi
    ," MPRA Paper 15514, University Library of Munich, Germany, revised 25 Nov 2008.

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