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Financial Development and Fragility : A Clustering Analysis

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  • João,Igor Custodio
  • Calice,Pietro
  • Lucas,Andre
  • Schaumburg,Julia

Abstract

This paper explores the potential correlations between financial development and state fragility, using a sample of 137 countries observed over the period from 1998–2019. The countries are grouped into clusters that capture the different joint states of financial development and fragility. The paper introduces a new switching methodology to further allow for a qualification of the evolution of countries in terms. of fragility scores with and without controlling for other variables. Irrespective of the precise methodology and state fragility measure as used in this paper, the findings indicate a negative correlation between financial development and state fragility, after controlling for several forms of observed and unobserved heterogeneity.

Suggested Citation

  • João,Igor Custodio & Calice,Pietro & Lucas,Andre & Schaumburg,Julia, 2024. "Financial Development and Fragility : A Clustering Analysis," Policy Research Working Paper Series 10850, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10850
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    References listed on IDEAS

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