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New financial development indicators: with a critical contribution to inequality empirics

  • Asongu Simplice

    ()

    (Yaoundé/Cameroun)

The employment of financial development indicators without due consideration to country/regional specific financial development realities remains an issue of substantial policy relevance. Financial depth in the perspective of money supply is not equal to liquid liabilities in every development context. This paper introduces complementary indicators to the existing Financial Development and Structure Database (FDSD). Dynamic panel system GMM estimations are applied. Different specifications, non-overlapping intervals and control variables are used to check the consistency of estimated coefficients. Our results suggest that from an absolute standpoint (GDP base measures), all financial sectors are pro-poor. However, three interesting findings are drawn from measures of sector importance. (1) The expansion of the formal financial sector to the detriment of other financial sectors has a disequalizing income effect. (2) Growth of informal and semi-formal financial sectors at the expense of the formal financial sector has an income equalizing effect. (3) The positive income redistributive effect of semi-formal finance in financial sector competition is higher than the corresponding impact of informal finance. It unites two streams of research by contributing at the same time to the macroeconomic literature on measuring financial development and responding to the growing field of economic development by means of informal financial sector promotion and microfinance. The paper suggests a practicable way to disentangle the effects of the various financial sectors on economic development. The equation of financial depth in the perspective of money supply to liquid liabilities has put on the margin the burgeoning informal financial sector in developing countries. The phenomenon of mobile banking is such an example.

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File URL: http://www.afridev.org/RePEc/agd/agd-wpaper/New-financial-indicators-and-inequality-empirics.pdf
File Function: Revised version, 2013
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Paper provided by African Governance and Development Institute. in its series Working Papers with number 13/036.

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Length: 29
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:agd:wpaper:13/036
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  15. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
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  25. Asongu, Simplice A., 2013. "How do institutions matter in the income-equalizing effect of mobile phone penetration?," European Economic Letters, European Economics Letters Group, vol. 2(2), pages 56-61.
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  30. Asongu, Simplice A, 2013. "How do financial reforms affect inequality through financial sector competition? Evidence from Africa," MPRA Paper 44410, University Library of Munich, Germany.
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