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Book part
Publication date: 26 November 2019

Avisek Sen and Arindam Laha

In the present era, there is visible trend of transition of the economy from the managerial capitalism to finance capitalism, which increases the role of finance in the economic

Abstract

In the present era, there is visible trend of transition of the economy from the managerial capitalism to finance capitalism, which increases the role of finance in the economic development of a country. The concept of financial development deals with the access, depth, efficiency, and stability of the financial institution and the market of a country. On the other hand, the financial integration is the degree of the financial openness of a country. There are de facto (gross stock of foreign assets and liabilities as a ratio of GDP, cross border capital flows) and de jure (capital account restrictions) measures of the financial integration. An efficient financial system increases the savings rate, which enhances capital accumulation in the economy. This process will channelize the fund from the household to the financial system. The economic liberalization induces the household to utilize their global market fund and enhance the marginal productivity of the capital. A deeper financial integration is expected to increase the public access in the domestic financial market as well as in the global market. Financial integration has some indirect effect on the economic growth through expansion and development of the financial system. In this context, this study examines the state of financial development and the financial integration across emerging countries in Asia. An attempt also was made to investigate whether the developed financial system promotes the financial integration or the financial integration induces the authority to develop the financial system. This study is based on the selected Asian countries over the period 2001–2016. Empirical evidence also support a significant positive association between the indicators of financial development and financial integration. It also indicates an empirical relationship from the financial development to the financial integration, and vice versa.

Details

The Gains and Pains of Financial Integration and Trade Liberalization
Type: Book
ISBN: 978-1-83867-004-7

Keywords

Open Access
Article
Publication date: 21 January 2022

Yizhi Wang, Brian Lucey, Samuel Alexandre Vigne and Larisa Yarovaya

(1) A concern often expressed in relation to cryptocurrencies is the environmental impact associated with increasing energy consumption and mining pollution. Controversy remains…

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Abstract

Purpose

(1) A concern often expressed in relation to cryptocurrencies is the environmental impact associated with increasing energy consumption and mining pollution. Controversy remains regarding how environmental attention and public concerns adversely affect cryptocurrency prices. Therefore, the paper aims to introduce the index of cryptocurrency environmental attention (ICEA), which aims to capture the relative extent of media discussions surrounding the environmental impact of cryptocurrencies. (2) The impacts of cryptocurrency environmental attention on long-term macro-financial markets and economic development remain part of undeveloped research fields. Based on these factors, the paper will further examine the effects of the ICEA on financial markets or economic developments.

Design/methodology/approach

(1) The paper introduces a new index to capture cryptocurrency environmental attention in terms of the cryptocurrency response to major related events through gathering a large amount of news stories around cryptocurrency environmental concerns – i.e. >778.2 million news items from the LexisNexis News & Business database, which can be considered as Big Data – and analysing that rich dataset using variety of quantitative techniques. (2) The vector error correction model (VECM) and structural VECM (SVECM) [impulse response function (IRF), forecast error variance decomposition (FEVD) and historical decomposition (HD)] are useful for characterising the dynamic relationships between ICEA and aggregate economic activities.

Findings

(1) The paper has developed a new measure of attention to sustainability concerns of cryptocurrency markets' growth, ICEA. (2) ICEA has a significantly positive relationship with the UCRY indices, volatility index (VIX), Brent crude oil (BCO) and Bitcoin. (3) ICEA has a significantly negative relationship with the global economic policy uncertainty (GlobalEPU) and global temperature uncertainty (GTU). Moreover, ICEA has a significantly positive relationship with the industrial production (IP) in the short term, whilst having a significantly negative relationship in the long term. (4) The HD of the ICEA displays higher linkages between environmental attention, Bitcoin and UCRY indices around key events that significantly change the prices of digital assets.

Research limitations/implications

The ICEA is significant in the analysis of whether cryptocurrency markets are sustainable regarding energy consumption requirements and negative contributions to climate change. Understanding of the broader impacts of cryptocurrency environmental concerns on cryptocurrency market volatility, uncertainty and environmental sustainability should be considered and developed. Moreover, the paper aims to point out future research and policy legislation directions. Notably, the paper poses the question of how cryptocurrency can be made more sustainable and environmentally friendly and how governments' cryptocurrency policies can address the cryptocurrency markets.

Practical implications

(1) The paper develops a cryptocurrency environmental attention index based on news coverage that captures the extent to which environmental sustainability concerns are discussed in conjunction with cryptocurrencies. (2) The paper empirically investigates the impacts of cryptocurrency environmental attention on other financial or economic variables [cryptocurrency uncertainty (UCRY) indices, Bitcoin, VIX, GlobalEPU, BCO, GTU index and the Organisation for Economic Co-operation and Development IP index]. (3) The paper provides insights into making the most effective use of online databases in the development of new indices for financial research.

Social implications

Whilst blockchain technology has a number of useful implications and has great potential to transform several industries, issues of high-energy consumption and CO2 pollution regarding cryptocurrency have become some of the main areas of criticism, raising questions about the sustainability of cryptocurrencies. These results are essential for both policy-makers and for academics, since the results highlight an urgent need for research addressing the key issues, such as the growth of carbon produced in the creation of this new digital currency. The results also are important for investors concerned with the ethical implications and environmental impacts of their investment choices.

Originality/value

(1) The paper provides an efficient new proxy for cryptocurrency and robust empirical evidence for future research concerning the impact of environmental issues on cryptocurrency markets. (2) The study successfully links cryptocurrency environmental attention to the financial markets, economic developments and other volatility and uncertainty measures, which has certain novel implications for the cryptocurrency literature. (3) The empirical findings of the paper offer useful and up-to-date insights for investors, guiding policy-makers, regulators and media, enabling the ICEA to evolve into a barometer in the cryptocurrency era and play a role in, for example, environmental policy development and investment portfolio optimisation.

Details

China Finance Review International, vol. 12 no. 3
Type: Research Article
ISSN: 2044-1398

Keywords

Book part
Publication date: 18 February 2022

Fe Amor Parel Gudmundsson

A retrospective study of the interdependence of financial development and energy investment can show us that the opinions of scientists have changed quite dynamically in previous…

Abstract

A retrospective study of the interdependence of financial development and energy investment can show us that the opinions of scientists have changed quite dynamically in previous centuries regarding the role of the financial sector in the economy. This is primarily due to technological innovations and economic transformations. At the same time, it is worth mentioning the main approaches and directions prevailing in economics over the past time. The founder of the theory that financial markets have a positive impact on the development of the economy is the English economist Walter Bagehot. In his work, published in 1873, the author analyzes the economic processes of that time and, as a result, gets a general description of the ongoing interactions between the financial and real sectors. His most important conclusion for us is that loan capital, according to the economist, contributes to the expansion of production.

Details

Multidimensional Strategic Outlook on Global Competitive Energy Economics and Finance
Type: Book
ISBN: 978-1-80117-899-0

Keywords

Article
Publication date: 3 April 2018

Pradeepta Sethi

This paper aims to examine how financial development affects the growth of industries that are more dependent on external finance, demystifying the roles played by the banks…

Abstract

Purpose

This paper aims to examine how financial development affects the growth of industries that are more dependent on external finance, demystifying the roles played by the banks, stock and bond markets.

Design/methodology/approach

The authors apply panel fixed-effects and dynamic panel generalized methods of moments on disaggregated industry-level data of the Indian manufacturing sector for the period of 2001-2015 to examine the relationship between financial development, banking market structure and economic growth.

Findings

The study finds that financial development has a significant impact on the growth process by reducing cost of external finance. Among the three sources of finance, the study finds that while the banking sector has been the most preferred source of external finance, increasing concentration and selective disbursement of credit have continued to dent the prospects of the industry. This paradoxical result explains the dismal performance of the Indian manufacturing sector.

Originality/value

The effect of financial development (encompassing banking market structure) on economic growth has received sparing attention. Related literature is unclear regarding the impact of banking market structure on the growth process in the context of emerging economies. The authors attempt to fill this important gap in the literature. Moreover, they add novelty to the literature by calculating the external dependence at the firm level, diverging from using US industry as a proxy for calculation of external dependence.

Article
Publication date: 22 March 2021

Selma Izadi, Mamunur Rashid and Parviz Izadi

Extending on the resource-seeking foreign direct investment (FDI) hypothesis, this paper aims to uncover the potential relationship between financial and non-financial channels…

Abstract

Purpose

Extending on the resource-seeking foreign direct investment (FDI) hypothesis, this paper aims to uncover the potential relationship between financial and non-financial channels and inward FDI before and after the global financial crisis.

Design/methodology/approach

The sample includes 561 year-country observations on 33 developed and developing countries during 2001 and 2017. This study investigates several determinants such as inflation, gross domestic product growth, exchange rate, trade openness, financial openness, Sharpe ratio and country market capitalization, using ordinary least squares, fixed effects and system generalized method of moments.

Findings

The results indicate a negative relationship between inflation and financial openness with FDI inflow while market capitalization and exchange rate were positively connected to FDI inflow. All three financial channels of FDI inflow: financial market size, financial openness and Sharpe ratio significantly influenced FDI inflow. Moreover, inflation, financial openness and Sharpe ratio imply a meaningful impact on the FDI inflow of developed and developing countries, with a relatively stronger influence during the post-crisis periods. Asymmetric impact tests also revealed similar results.

Research limitations/implications

These findings offer an impression that financial market development channels may significantly boost FDIs in developing and, as well as developed countries. With special reference to the developing countries, a disciplined financial market and financial openness may help attract more FDIs.

Originality/value

Impact of the financial crisis on FDI inflows while observing the impact of the financing channels in developing and developed countries is rare in the academic domain. This study forwards that a structured and open financial market may help in recovering from the financial crisis.

Details

Journal of Financial Economic Policy, vol. 14 no. 1
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 11 December 2019

Mohamad Hassan and Evangelos Giouvris

This study Investigates Shareholders' value adjustment in response to financial institutions (FIs) merger announcements in the immediate event window and in the extended event…

Abstract

Purpose

This study Investigates Shareholders' value adjustment in response to financial institutions (FIs) merger announcements in the immediate event window and in the extended event window. This study also investigates accounting measures performance, comparison of post-merger to pre-merger, including several cash flow measures and not just profitability measures, as the empirical literature review suggests. Finally, the authors examine FIs mergers orientations of diversification and focus create more value for shareholders (in the immediate announcement window and several months afterward) and/or generates better cash flows, profitability and less credit risk.

Design/methodology/approach

This study examines FIs merger effect on bidders’ shareholder’s value and on their observed performance. This examination deploys three techniques simultaneously: a) an event study analysis, to estimate and calculate abnormal returns (ARs) and cumulative abnormal returns (CARs) in the narrow windows of the merger announcement, b) buy and hold event study analysis, to estimate ARs in the wider window of the event, +50 to +230 days after the merger announcement and c) an observed performance analysis, of financial and capital efficiency measures before and after the merger announcement; return on equity, liquidity, cost to income ratio, capital to total assets ratio, net loans to total loans, credit risk, loans to deposits ratio, other expenses and total assets, economic value addition, weighted average cost of capital and return on invested capital. Deal criteria of value, mega-deals, strategic orientation (as in Ansoff (1980) growth strategies), acquiring bank size and payment method are set as individually as control variables.

Findings

Results show that FIs mergers destroy share value for the bidding firms pursuing a market penetration strategy. Market development and product development strategies enable shareholders’ value creation in short and long horizons. Diversification strategies do not influence bidding shareholders’ value. Local bank to bank mergers create shareholders’ value and enhance liquidity and economic value in the short run. Bank to bank cross border mergers create value for bidders’ in the long term but are associated with high costs and higher risks.

Originality/value

A significant advancement over the current literature is in assessing mergers, not only for bank bidders but also for the three pillars FIs of the financial sector; banks, real-estate companies and investment companies mergers. It is an improvement over current finance literature because it deploys two different strategies in the analysis. At a univariate level, shareholder value creation and market reaction to merger announcements are examined over short (−5 or +5 days) and long (+230 days) windows of the event. Followed by regressing, the resultant CARs and BHARs over financial performance variables at the multivariate level.

Article
Publication date: 15 January 2020

Atul Mehta and Joysankar Bhattacharya

The study aims to understand how various channels of financial sector development affect the income inequality across Indian states and whether the inequality widening or…

Abstract

Purpose

The study aims to understand how various channels of financial sector development affect the income inequality across Indian states and whether the inequality widening or narrowing hypothesis of financial development may be confirmed at a sub-national level.

Design/methodology/approach

Using state-wise annual data for the period from 1999-2000 to 2011-2012, a panel data analysis using generalised method of moments (GMM) estimator is conducted for a sample of 15 major Indian states.

Findings

The results confirm the inequality widening hypothesis of financial sector development in India. While each channel affects different section of the population in a different way, their overall effect on the income inequality remains unfavourable.

Originality/value

This paper is the first ever study to provide a comparative empirical evidence for the effect of each channel of financial development on the income inequality in India. The results provide significant insights to the policymakers, practitioners and academia in the financial sector with respect to the efficiency of each channel of financial development in bridging the gap between the poor and rich.

Details

Journal of Financial Economic Policy, vol. 12 no. 4
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 2 November 2015

Muhammad Ali Nasir, Mushtaq Ahmad, Ferhan Ahmad and Junjie Wu

The purpose of this paper is to provide a different context for considering issues of financial stability and instability, with reference to economic growth and price stability in…

Abstract

Purpose

The purpose of this paper is to provide a different context for considering issues of financial stability and instability, with reference to economic growth and price stability in particular.

Design/methodology/approach

This paper pursued an empirical exploration of six pillars of financial stability, based on a data set for the UK extending from 1985 (Q1) to 2008 (Q2), through the construction of a vector error correction model, including an impulse response function analysis.

Findings

The findings show a strong association between the financial and economic stability even in a non-crisis regime. This includes, for example, a strong association exists between the stock market and the real economy; exchange rate appreciation may not provide for long-term real economic growth; inflation does not contribute to real economic growth, both the sensitivity of the economy to yields and a significant lag in transitional effects from financial markets to the real sector; a positive role of credit creation within a non-crisis regime; exchange rate appreciation affects purchasing power; and potential points of linkage between sovereign debt activity and general price levels.

Research limitations/implications

The findings should be considered in the context of a concept of the economy as fundamentally dynamic and subject to complex cumulative processes.

Practical implications

The findings indicate there is a role for state oversight and intervention within a non-crisis regime based on the complexity of possible interactions that may undermine financial and price stability, with consequences for their association with economic growth.

Originality/value

The study provides a new perspective for considering issues of financial stability and instability.

Details

Journal of Financial Economic Policy, vol. 7 no. 4
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 8 June 2018

Dinabandhu Sethi and Debashis Acharya

The purpose of this paper is to assess the dynamic impact of financial inclusion on economic growth for a large number of developed and developing countries.

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Abstract

Purpose

The purpose of this paper is to assess the dynamic impact of financial inclusion on economic growth for a large number of developed and developing countries.

Design/methodology/approach

This study uses some panel data models such as country-fixed effect, random effect and time fixed effect regressions, panel cointegration, and panel causality tests to examine the linkage between financial inclusion and economic growth. Panel cointegration is being used to test the long run association between financial inclusion and economic growth, whereas panel causality test is used to find the direction of causality between financial inclusion and economic growth. The data on financial inclusion are taken from Sarma (2012) for the period 2004-2010.

Findings

The empirical findings reveal that there is a positive and long run relationship between financial inclusion and economic growth across 31 countries in the world. Further, panel causality test shows a bi-directional causality between financial inclusion and economic growth Thus, the study confirms that financial inclusion is one of the main drivers of economic growth.

Research limitations/implications

This study has two limitations. First, this study considers only banking institutions in the analysis. Second, the period tested for the long run relationship is not long enough.

Practical implications

This study empirically measures the quantitative impact of financial inclusion policies pursued across the world. The study also suggests that policies emphasizing financial sector reforms in general and promoting financial inclusion in particular shall result in higher economic growth in the long run.

Originality/value

This study attempts to assess the long run relationship between financial inclusion and economic growth with the help of a multidimensional index of financial inclusion. Therefore, this can be a valuable contribution to the banks and policymakers.

Details

Journal of Financial Economic Policy, vol. 10 no. 3
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 22 November 2023

Tariq Ahmad Mir, R. Gopinathan and D.P. Priyadarshi Joshi

This study aims to analyze the long-run dynamic relationship between financial inclusion and economic growth for developing nations.

Abstract

Purpose

This study aims to analyze the long-run dynamic relationship between financial inclusion and economic growth for developing nations.

Design/methodology/approach

This study develops a comprehensive financial inclusion index based on the UNDP methodology for 53 developing nations. The authors use second-generation unit root tests, cointegration techniques and an advanced dynamic common correlated effects estimator model called cross-sectional augmented autoregressive distributed lags (CS-ARDL) to examine long-run dynamics among variables.

Findings

The tests confirm the presence of slope-heterogeneity and cross-sectional dependency. The second-generation panel unit root tests show the chosen variables are stationary at first difference. The bootstrap Westerlund cointegration result shows the variables are cointegrated in the long run. The CS-ARDL estimates conclude that financial inclusion positively enhances gross domestic product per capita in selected developing countries. The robustness check through augmented mean group estimation validates the findings.

Originality/value

The study makes three important contributions: first, it constructs a comprehensive financial inclusion index using 10 variables for a panel of 53 developing nations; second, the potential cross-section dependence and slope heterogeneity of panel data have been accounted for by applying the second-generation unit root tests; third, the study uses the dynamic common correlated effects estimator model (CS-ARDL) to examine long-run dynamics among variables.

Details

Journal of Financial Economic Policy, vol. 16 no. 2
Type: Research Article
ISSN: 1757-6385

Keywords

1 – 10 of over 125000