The Political Economy of Financial Development
AbstractPolitical economy theories of financial development argue that in countries where a narrow elite controls political decisions, financial development may be obstructed to deny access to finance to potential competitors. We use panel data on developed and developing countries from 1975- 2000 to examine this hypothesis, as well as looking at the effect of regime stability on financial development. Our results show that the degree of democracy and political stability are significant explanatory factors in determining the speed of financial development. The banking sector benefits from regime stability and increasing democracy, while stock market capitalisation grows fastest in fully democratic regimes.
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Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 04/21.
Date of creation: Jul 2004
Date of revision: Oct 2004
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Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
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Other versions of this item:
- Sourafel Girma & Anja Shortland, 2004. "The Political Economy of Financial Development," Money Macro and Finance (MMF) Research Group Conference 2004 39, Money Macro and Finance Research Group.
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- K0 - Law and Economics - - General
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-07-26 (All new papers)
- NEP-DEV-2004-07-26 (Development)
- NEP-FIN-2004-07-26 (Finance)
- NEP-MFD-2004-07-26 (Microfinance)
- NEP-PKE-2004-07-26 (Post Keynesian Economics)
- NEP-POL-2004-07-26 (Positive Political Economics)
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