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Re-examining the Nexus Between Financial Development and Poverty Reduction: Evidence from Emerging Economies

Author

Listed:
  • Appiah, Michael

    (Jiangsu University, China; DorstellConsult Ltd., Koforidua, Ghana)

  • Frowne, Doreen Idan

    (Koforidua Technical University, Ghana)

  • Tetteh, Derrick

    (University of Cape Coast, Ghana)

Abstract

During the past two decades, the research on financial development and growth has gained a lot of coverage. This research looks at the degree to which financial development helps alleviate poverty. Cointegration estimation of the system, called the FMOLS, was applied over the period 1995–2015 to a panel of five African emerging economies. Using liquid liability as a percentage of GDP and bank domestic credit as a percentage of GDP as the main financial development indicators, the findings indicate that bothfinancial development indicators minimize poverty. Other factors such as economic growth and inflation are not statistically significant. Government spending, on the other hand, does not tend to affect poverty irrespective of the measure of financial growth employed. These findings suggest that while financial growth is capable of reducing poverty, it must be combined with a reduction in inflation, as well as other macroeconomic variables. The use of liquid liability and bank domestic credit as measures offinancial growth is robust to the results.

Suggested Citation

  • Appiah, Michael & Frowne, Doreen Idan & Tetteh, Derrick, 2020. "Re-examining the Nexus Between Financial Development and Poverty Reduction: Evidence from Emerging Economies," Asian Journal of Applied Economics/ Applied Economics Journal, Kasetsart University, Faculty of Economics, Center for Applied Economic Research, vol. 27(2), pages 125-144, December.
    • Handle: RePEc:ris:apecjn:0048
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    Citations

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    Cited by:

    1. Lemnge, Deusdedit Augustine & Raphael, Gwahula, 2023. "Financial Development and Poverty Reduction in Sub-Saharan Africa," African Journal of Economic Review, African Journal of Economic Review, vol. 11(4), September.
    2. Clement Olalekan Olaniyi & James Temitope Dada & Nicholas Mbaya Odhiambo & Xuan Vinh Vo, 2023. "Modelling asymmetric structure in the finance-poverty nexus: empirical insights from an emerging market economy," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(1), pages 453-487, February.
    3. Moses Umkanagwa Paul & Prof Ibrahim Baba Iya, PhD & Miftahu Idris, PhD, 2023. "Impact of Financial Development and Economic Growth on Poverty in Middle Income African Countries," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(9), pages 142-155, September.

    More about this item

    Keywords

    financial development; poverty reduction; emerging economies; panel cointegration;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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