IDEAS home Printed from https://ideas.repec.org/a/bpj/bejmac/v10y2010i1n12.html
   My bibliography  Save this article

The Link between the Economic Structure and Financial Development

Author

Listed:
  • Ramcharan Rodney

    (International Monetary Fund)

Abstract

There is now considerable evidence that a range of institutional, legal, cultural, political and religious variables determine financial development. But economists have conjectured that the presence of diversification opportunities in the real economy can also shape the development of the financial sector. This paper finds evidence in support of this conjecture. Both the OLS estimates, and the IV results, which use instruments derived from topographical characteristics, suggest that increased economic concentration can impede financial development. Thus, financial underdevelopment might have not only socio-cultural and political causes. Risk diversification opportunities in the real economy might also be key.

Suggested Citation

  • Ramcharan Rodney, 2010. "The Link between the Economic Structure and Financial Development," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-37, May.
    • Handle: RePEc:bpj:bejmac:v:10:y:2010:i:1:n:12
    DOI: 10.2202/1935-1690.1887
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1935-1690.1887
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1935-1690.1887?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 857-880.
    2. Demirguc-Kunt, Asli & Detragiache, Enrica, 2002. "Does deposit insurance increase banking system stability? An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1373-1406, October.
    3. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    4. Imbs, Jean, 2006. "The real effects of financial integration," Journal of International Economics, Elsevier, vol. 68(2), pages 296-324, March.
    5. Sebnem Kalemli-Ozcan & Bent E. Sørensen & Oved Yosha, 2003. "Risk Sharing and Industrial Specialization: Regional and International Evidence," American Economic Review, American Economic Association, vol. 93(3), pages 903-918, June.
    6. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    7. Lerman, Robert I. & Yitzhaki, Shlomo, 1989. "Improving the accuracy of estimates of Gini coefficients," Journal of Econometrics, Elsevier, vol. 42(1), pages 43-47, September.
    8. Fearon, James D, 2003. "Ethnic and Cultural Diversity by Country," Journal of Economic Growth, Springer, vol. 8(2), pages 195-222, June.
    9. Saint-Paul, Gilles, 1992. "Technological choice, financial markets and economic development," European Economic Review, Elsevier, vol. 36(4), pages 763-781, May.
    10. Romain Wacziarg & Karen Horn Welch, 2008. "Trade Liberalization and Growth: New Evidence," The World Bank Economic Review, World Bank, vol. 22(2), pages 187-231, June.
    11. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-751, August.
    12. Obstfeld, Maurice, 1994. "Risk-Taking, Global Diversification, and Growth," American Economic Review, American Economic Association, vol. 84(5), pages 1310-1329, December.
    13. Kiminori Matsuyama, 2008. "Aggregate Implications of Credit Market Imperfections," NBER Chapters, in: NBER Macroeconomics Annual 2007, Volume 22, pages 1-60, National Bureau of Economic Research, Inc.
    14. Sebnem Kalemli-Ozcan & Bent E. Sørensen & Oved Yosha, 1999. "Risk Sharing and Industrial Specialization: Regional and International Evidence," Working Papers 99-16, Brown University, Department of Economics.
    15. Ramirez, Carlos D., 2003. "Did branch banking restrictions increase bank failures? Evidence from Virginia and West Virginia in the late 1920s," Journal of Economics and Business, Elsevier, vol. 55(4), pages 331-352.
    16. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1203-1250.
    17. Marcelo J. Moreira, 2003. "A Conditional Likelihood Ratio Test for Structural Models," Econometrica, Econometric Society, vol. 71(4), pages 1027-1048, July.
    18. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
    19. Thomas J. Holmes & Sanghoon Lee, 2012. "Economies of Density versus Natural Advantage: Crop Choice on the Back Forty," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 1-19, February.
    20. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martin Fiszbein, 2022. "Agricultural Diversity, Structural Change, and Long-Run Development: Evidence from the United States," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(2), pages 1-43, April.
    2. Chowdhury, Mohammad Tarequl Hasan & Rahman, Muhammad Habibur & Ulubasoglu, Mehmet Ali, 2018. "Geography Dictates, But How? Topography, Spatial Concentration and Sectoral Diversification," MPRA Paper 87245, University Library of Munich, Germany.
    3. Jaimovich, Esteban, 2011. "Sectoral differentiation, allocation of talent, and financial development," Journal of Development Economics, Elsevier, vol. 96(1), pages 47-60, September.
    4. Chowdhury, Mohammad Tarequl H. & Bhattacharya, Prasad Sankar & Mallick, Debdulal & Ulubaşoğlu, Mehmet Ali, 2014. "An empirical inquiry into the role of sectoral diversification in exchange rate regime choice," European Economic Review, Elsevier, vol. 67(C), pages 210-227.
    5. Bhattacharya, Prasad Sankar & Chowdhury, Prabal Roy & Rahman, Habibur, 2023. "Does credit availability mitigate domestic conflict?," Economic Modelling, Elsevier, vol. 119(C).
    6. Martin Fiszbein, 2017. "Agricultural Diversity, Structural Change and Long-run Development: Evidence from the U.S," NBER Working Papers 23183, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sebnem Kalemli-Ozcan & Bent E. Sørensen & Oved Yosha, 1999. "Risk Sharing and Industrial Specialization: Regional and International Evidence," Working Papers 99-16, Brown University, Department of Economics.
    2. Sebnem Kalemli-Ozcan & Bent E. Sørensen & Oved Yosha, 2003. "Risk Sharing and Industrial Specialization: Regional and International Evidence," American Economic Review, American Economic Association, vol. 93(3), pages 903-918, June.
    3. Sebnem Kalemli-Ozcan & Elias Papaioannou & José-Luis Peydró, 2013. "Financial Regulation, Financial Globalization, and the Synchronization of Economic Activity," Journal of Finance, American Finance Association, vol. 68(3), pages 1179-1228, June.
    4. Jaap W. B. Bos & Claire Economidou & Lu Zhang, 2020. "Specialization in the presence of trade and financial openness," Empirical Economics, Springer, vol. 58(6), pages 2783-2816, June.
    5. Bos, J.W.B. & Economidou, C. & Zhang, L., 2011. "Specialization in the presence of trade and financial integration: explorations of the integration-specialization nexus," Research Memorandum 026, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    6. Ṣebnem Kalemli-Özcan & Bent E. Sorensen & Oved Yosha, 1999. "Industrial specialization and the asymmetry of shocks across regions," Research Working Paper 99-06, Federal Reserve Bank of Kansas City.
    7. Vadym Volosovych, 2013. "Risk sharing from international factor income: explaining cross-country differences," Applied Economics, Taylor & Francis Journals, vol. 45(11), pages 1435-1459, April.
    8. Kalemli-Ozcan, Sebnem & Sorensen, Bent E. & Yosha, Oved, 2001. "Economic integration, industrial specialization, and the asymmetry of macroeconomic fluctuations," Journal of International Economics, Elsevier, vol. 55(1), pages 107-137, October.
    9. Sebnem Kalemli-Ozcan & Elias Papaioannou & José Luis Peydró, 2010. "Financial Regulation, Integration and Synchronization of Economic Activity," Koç University-TUSIAD Economic Research Forum Working Papers 1005, Koc University-TUSIAD Economic Research Forum, revised Apr 2010.
    10. Kalemli-Ozcan, Sebnem & Sørensen, Bent E & Yosha, Oved, 2004. "Asymmetric Shocks and Risk Sharing in a Monetary Union: Updated Evidence and Policy Implications for Europe," CEPR Discussion Papers 4463, C.E.P.R. Discussion Papers.
    11. Sebnem Kalemi-Ozcan & Bent E. Sorensen & Oved Yosha, 2000. "Risk Sharing and Sectoral Specialization: Regional and International Evidence," Econometric Society World Congress 2000 Contributed Papers 1582, Econometric Society.
    12. Miklos Koren & Silvana Tenreyro, 2003. "Diversification and development," Working Papers 03-3, Federal Reserve Bank of Boston.
    13. Martin, Philippe & Rey, Helene, 2004. "Financial super-markets: size matters for asset trade," Journal of International Economics, Elsevier, vol. 64(2), pages 335-361, December.
    14. Sèna Kimm Gnangnon, 2022. "Export diversification and financial openness," International Economics and Economic Policy, Springer, vol. 19(4), pages 675-717, October.
    15. Du, Julan & He, Qing & Zhang, Ce, 2022. "Risk sharing and industrial specialization in China," Journal of Comparative Economics, Elsevier, vol. 50(2), pages 599-626.
    16. Leyla Yusifzada & Aytan Mammadova, 2015. "Financial intermediation and economic growth," William Davidson Institute Working Papers Series wp1091, William Davidson Institute at the University of Michigan.
    17. Kalemli-Özcan, Sebnem & Papaioannou, Elias & Peydró, José-Luis, 2009. "Financial Integration and Business Cycle Synchronization," CEPR Discussion Papers 7292, C.E.P.R. Discussion Papers.
    18. Mr. Rodney Ramcharan, 2005. "How Big Are the Benefits of Economic Diversification? Evidence from Earthquakes," IMF Working Papers 2005/048, International Monetary Fund.
    19. Meon, Pierre-Guillaume & Weill, Laurent, 2004. "A view of the European Union as an evolving country portfolio," European Journal of Political Economy, Elsevier, vol. 20(4), pages 853-868, November.
    20. Miklós Koren & Silvana Tenreyro, 2007. "Volatility and Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(1), pages 243-287.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejmac:v:10:y:2010:i:1:n:12. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.