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Banking Sector Openness and Economic Growth

Author

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  • Nihal Bayraktar

    (Nihal Bayraktar is at the School of Business Administration, Pennsylvania State University-Harrisburg, and the World Bank; e-mail: nxb23@psu.edu)

  • Yan Wang

    (Yan Wang is Senior Economist, The World Bank Group, Washington D.C., USA; e-mail: ywang2@worldbank.org)

Abstract

Banking sector openness may directly increase growth by improving the quality of financial services and increasing funds available, or indirectly by improving the efficiency of financial intermediaries, both of which may reduce the cost of financing, in turn, increase capital accumulation and economic growth. The objective of this paper is to empirically reinvestigate these direct and indirect links, using a more advanced econometric technique (generalised method-of-moments [GMM] dynamic panel estimators). An illustrative model is presented to link financial market development with investment. The empirical results support the presence of direct and indirect links, thus encouraging countries planning to open their financial markets.

Suggested Citation

  • Nihal Bayraktar & Yan Wang, 2008. "Banking Sector Openness and Economic Growth," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 2(2), pages 145-175, June.
    • Handle: RePEc:sae:mareco:v:2:y:2008:i:2:p:145-175
    DOI: 10.1177/097380100800200201
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    References listed on IDEAS

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    1. Saibal Ghosh, 2016. "Foreign banks in MENA countries: how important? How relevant?," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 32(1), pages 77-98, May.

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    More about this item

    Keywords

    Banking Sector Openness; Capital Accumulation; Economic Growth; Efficiency of Banks; Foreign Banks; JEL Classification: G21; JEL Classification: O16; JEL Classification: O40; JEL Classification: F10; JEL Classification: F21;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • F10 - International Economics - - Trade - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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