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The Determinants Of Financial Development: Institutions, Openness And Financial Liberalisation

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  • Siong hook Law
  • Muzafar shah Habibullah

Abstract

This paper provides new evidence that sheds light on the influence of institutional quality, trade openness and financial liberalisation on financial market development, using data from 27 economies (the G-7, Europe, East Asia and Latin America) during 1980-2001. The dynamic panel data analysis results demonstrate that real income "per capita" and institutional quality are statistically significant determinants of banking sector development and capital market development. The trade openness, however, is more prominent in promoting capital market development. In terms of financial liberalisation, the empirical results suggest that domestic financial sector reforms tend to promote banking sector development, whereas stock market liberalisation is potent in delivering stock market development. Nevertheless, the financial liberalisation programmes are more responsive in developed economies. Copyright (c) 2009 The Author. Journal compilation (c) 2009 Economic Society of South Africa.

Suggested Citation

  • Siong hook Law & Muzafar shah Habibullah, 2009. "The Determinants Of Financial Development: Institutions, Openness And Financial Liberalisation," South African Journal of Economics, Economic Society of South Africa, vol. 77(1), pages 45-58, March.
    • Handle: RePEc:bla:sajeco:v:77:y:2009:i:1:p:45-58
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    References listed on IDEAS

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    Cited by:

    1. Missaoui, Ibtissem & Ben Rejeb, Jaleleddine & Elkhaldi, Abderrazek, 2016. "Les déterminants institutionnels et macroéconomiques du développement du marché boursier dans les pays de la région MENA
      [Institutional and macroeconomic determinants of stock market development in      ," MPRA Paper 83619, University Library of Munich, Germany.
    2. repec:bla:ausecr:v:51:y:2018:i:4:p:486-501 is not listed on IDEAS
    3. Sani Ibrahim, Saifullahi & Tanimu, Nuruddeen, 2015. "The Linkages between Trade Openness, Financial Openness and Economic Growth in Nigeria," MPRA Paper 87494, University Library of Munich, Germany, revised 06 Aug 2016.
    4. Jean-Pierre Allegret & Sana Azzabi, 2014. "Intégration financière internationale et croissance économique dans les pays émergents et en développement : le canal du développement financier," Revue d’économie du développement, De Boeck Université, vol. 22(3), pages 27-68.
    5. Ho, Sin-Yu & Odhiambo, Nicholas, 2017. "The macroeconomic drivers of stock market development: Evidence from Hong Kong," Working Papers 23438, University of South Africa, Department of Economics.
    6. repec:rej:journl:v:19:y:2016:i:61:p:211-226 is not listed on IDEAS
    7. Syed Ali Raza & Syed Tehseen Jawaid & Sahar Afshan & Mohd Zaini Abd Karim, 2015. "Is stock market sensitive to foreign capital inflows and economic growth?: Evidence from Pakistan," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 8(3), pages 142-164, October.
    8. repec:bla:afrdev:v:29:y:2017:i:2:p:272-292 is not listed on IDEAS
    9. repec:blg:journl:v:12:y:2017:i:3:p:5-16 is not listed on IDEAS
    10. Pei-Fen Chen & Jhih-Hong Zeng & Chien-Chiang Lee, 2015. "Monetary Policy and the Diversification–Profitability Linkage in Banking: Evidences from Emerging Market Economies," South African Journal of Economics, Economic Society of South Africa, vol. 83(4), pages 576-597, December.
    11. Nyasha, Sheilla & Odhiambo, Nicholas M., 2018. "Determinants of the Brazilian stock market development," Working Papers 24248, University of South Africa, Department of Economics.
    12. repec:eee:intfin:v:56:y:2018:i:c:p:71-92 is not listed on IDEAS
    13. repec:eee:ecanpo:v:60:y:2018:i:c:p:18-26 is not listed on IDEAS
    14. Ghassan Omet, 2011. "Stock Market Liquidity: Comparative Analysis of The Abu Dhabi Stock Exchange and Dubai Financial Market," Working Papers 655, Economic Research Forum, revised 12 Jan 2011.

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