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Financial Development and Poverty: a Panel Data Analysis

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  • Pablo Ordónez

Abstract

The relationship between financial development and poverty is one that has not been extensively explored in the literature. This is the main objective of this paper. With a panel dataset of 147 countries between 1960 and 2008, and using infant mortality as a proxy indicator of poverty, the results show that the relationship between financial development and infant mortality is negative. This means that higher levels of financial development are associated with lower levels of poverty. The result is important since it already controls for the effect that economic growth has on poverty reduction, given the well documented fact that financial development has a positive effect on economic growth. The results are robust to the use of other variables as indicators of financial development, as the long-run relationship is still negative. The findings in this paper highlight the importance of financial development in poverty reduction, and suggest that future research could try and explain what are the mechanisms behind this relationship.

Suggested Citation

  • Pablo Ordónez, 2012. "Financial Development and Poverty: a Panel Data Analysis," Borradores de Economía y Finanzas 10024, Universidad Icesi.
    • Handle: RePEc:col:000130:010024
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    Cited by:

    1. Nasim Shah Shirazi & Sajid Amin Javed & Dawood Ashraf, 2018. "Remittances, Economic Growth and Poverty: A Case of African OIC Member Countries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 57(2), pages 121-143.

    More about this item

    Keywords

    Financial Development; Poverty Alleviation; Infant Mortality; GDP Growth;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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