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Economic Growth And Financial Sector Development

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  • Hsin-Yu Liang
  • Alan Reichert

Abstract

This paper estimates an Odedokun-type supply-leading model of financial sector development (FSD) which incorporates both banking and capital market variables as potential drivers of economic growth. The current findings illustrate the impact on economic growth of various measures of FSD which includes basic intermediation services, as measured by M2 and money market mutual funds, and more advanced financial products such as stock market development and risk management services. The empirical findings in this study document an important shift from an exclusive reliance on basic banking services among emerging/developing countries towards an expanding role for the capital markets. An even stronger emphasis on the role of capital markets is documented for a group of advanced countries.

Suggested Citation

  • Hsin-Yu Liang & Alan Reichert, 2007. "Economic Growth And Financial Sector Development," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 1(1), pages 68-78.
    • Handle: RePEc:ibf:ijbfre:v:1:y:2007:i:1:p:68-78
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    Cited by:

    1. IWASAKI, Ichiro & ONO, Shigeki, 2023. "Economic Development and the Finance-Growth Nexus : A Meta-Analytic Approach," CEI Working Paper Series 2023-06, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    2. Michael S. Ogunmuyiwa & Babatunde A. Okuneye & Joseph N. Amaefule, 2017. "Bank Credit and Growth of the Manufacturing Sector Nexus in Nigeria: An ARDL Approach," EuroEconomica, Danubius University of Galati, issue 2(36), pages 62-72, November.
    3. Hsin-Yu Liang & Alan K. Reichert, 2010. "Are Empirical Results In Economic Growth Models Biased Because Of Omitted Variables? Cross-Country Evidence," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 4(3), pages 31-42.

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