Where Is The Cheese? Synthesizing a Giant Literature on Causes and Consequences of Financial Sector Development

A likely image of the current state of the literature on financial sector development is that of a Swiss cheese with many holes inside important areas of knowledge. The aim of this synthesis paper is to map the current knowledge and ignorance (i.e., holes) in the literature by providing a narrative for the empirical findings of a comprehensive literature review concerning the quantitative effects of financial development on economic growth and employment, and various determinants of financial sector development. The literature was restricted mostly to high-quality academic research that focuses on developing countries over the period 1960-2012. Because of data constraints, this review also includes cross-country analyses, in which developed and developing countries are considered together. The main findings include (i) a positive relationship between financial development and economic growth and employment, subject to a number of qualifications; (ii) a complicated relationship of regulations and supervision to financial sector development; and (iii) a positive relationship between an enabling institutional environment and financial sector development. This review also identifies some missing avenues in the literature and provides a number of suggestions for future work.

Bibliographic Details

Main Author:	Selşah Paşalı, Selahattin
Language:	English en_US
Published:	World Bank, Washington, DC 2013-10
Subjects:	ACCESS TO FINANCE, ACCESS TO INFORMATION, ACCESSIBILITY, ACCOUNTING, ACCOUNTING STANDARDS, ASYMMETRIC INFORMATION, BANK ACCOUNT, BANK ACCOUNTS, BANK ASSETS, BANK BRANCH, BANK BRANCHES, BANK LENDING, BANK REGULATION, BANK REGULATIONS, BANK SPREADS, BANK SUPERVISION, BANKING CRISES, BANKING CRISIS, BANKING REGULATION, BANKING SECTOR, BANKING SECTOR DEVELOPMENT, BANKING SECTOR REFORM, BANKING SECTOR REFORMS, BANKING SECTORS, BANKING STRUCTURE, BANKING SUPERVISION, BANKING SYSTEM, BANKING SYSTEMS, BARRIERS TO COMPETITION, BARRIERS TO ENTRY, BOND, BOND MARKET, BOND MARKET CAPITALIZATION, BRITISH LEGAL ORIGIN, CAPITAL ACCOUNT, CAPITAL ACCOUNT LIBERALIZATION, CAPITAL ACCOUNT RESTRICTIONS, CAPITAL ACCOUNTS, CAPITAL ACCUMULATION, CAPITAL ADEQUACY, CAPITAL FLOWS, CAPITAL MARKET, CAPITAL MARKET DEVELOPMENT, CAPITAL MARKETS, CAPITAL REQUIREMENTS, CENTRAL BANK, COMMERCIAL BANK, COMMERCIAL BANKS, CONTRACT ENFORCEMENT, CONTRACTUAL SAVINGS, CONTRACTUAL SAVINGS INSTITUTIONS, CORPORATE GOVERNANCE, CORRUPTION, COUNTRY RISK, CREDIT ALLOCATION, CREDIT BUREAUS, CREDIT GROWTH, CREDIT INFORMATION, CREDIT REGISTRIES, CREDIT RISK, CREDITOR, CREDITOR RIGHTS, CREDITORS, CRISIS COUNTRIES, CURRENCY, CURRENCY CRISES, CURRENCY CRISIS, DEBT, DEPOSIT, DEPOSIT INSURANCE, DEPOSIT MONEY BANK, DEPOSITORS, DEPOSITS, DERIVATIVES, DEVELOPING COUNTRIES, DISCLOSURE OF INFORMATION, DISCLOSURE REQUIREMENTS, DOMESTIC BANKING, DOMESTIC BANKING MARKETS, DOMESTIC BANKS, DOMESTIC CREDIT, DOMESTIC FINANCIAL MARKET, DOMESTIC MARKET, ECONOMIC COOPERATION, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, EMERGING MARKETS, EMPLOYMENT GROWTH, ENTRY BARRIERS, EQUITY MARKET, EQUITY MARKETS, FINANCIAL ASSETS, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DEPTH, FINANCIAL DEREGULATION, FINANCIAL DEVELOPMENT, FINANCIAL FRAGILITY, FINANCIAL HISTORY, FINANCIAL INSTITUTIONS, FINANCIAL INTERMEDIATION, FINANCIAL LIBERALIZATION, FINANCIAL OPENNESS, FINANCIAL SECTOR ASSESSMENT, FINANCIAL SECTOR DEVELOPMENT, FINANCIAL SECTOR REFORM, FINANCIAL STABILITY, FINANCIAL STRUCTURE, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FOREIGN BANK, FOREIGN BANK ENTRY, FOREIGN BANK PARTICIPATION, FOREIGN BANKS, FOREIGN INVESTMENT, GOVERNMENT BANKS, GOVERNMENT OWNERSHIP, GROSS DOMESTIC PRODUCT, HOUSEHOLD INCOME, HOUSEHOLDS, INCOME GROUP, INCUMBENT BANKS, INEQUALITY, INFLATION, INFLATION RATES, INFORMATION SERVICES, INFORMATION SHARING, INSTITUTIONAL INVESTOR, INSURANCE MARKET, INSURANCE MARKETS, INSURANCE PENETRATION, INSURANCE PREMIUM, INTEREST RATE, INTEREST RATE CONTROLS, INTERNATIONAL BANK, INTERNATIONAL CAPITAL, INTERNATIONAL DEVELOPMENT, INTERNATIONAL FINANCIAL MARKETS, INTERNATIONAL SETTLEMENTS, INVENTORY, INVESTMENT CLIMATE, LABOR MARKET, LABOR MARKETS, LACK OF ACCESS, LACK OF COMPETITION, LEGAL CONSTRAINTS, LEGAL ENVIRONMENT, LEGAL FRAMEWORK, LENDING AGREEMENT, LEVEL OF RISK, LIFE INSURANCE, LIQUIDITY, LIQUIDITY CONSTRAINTS, LOAN, MACRO-STABILITY, MARKET ACCESS, MARKET DEPTH, MARKET DISCIPLINE, MARKET DISTORTIONS, MARKET LIQUIDITY, MICRO-FINANCE, MICRO-FINANCE INSTITUTIONS, MICROFINANCE, MONETARY FUND, MORAL HAZARD, NONPERFORMING LOANS, NPL, OPEN ECONOMIES, OUTPUT LOSS, OUTPUT LOSSES, OVERHEAD COSTS, PENSION, PENSION ASSETS, PENSION FUNDS, PENSION REFORMS, PENSION SYSTEMS, PENSIONS, PRIVATE CREDIT, PRIVATE CREDIT BUREAUS, PRIVATE ENTERPRISES, PROFITABILITY, PUBLIC REGISTRIES, REAL ESTATE, REGULATORY FRAMEWORK, REGULATORY GOVERNANCE, RESERVE, RESERVE REQUIREMENTS, RETURN, RETURN ON ASSETS, RETURNS, RISK DIVERSIFICATION, RISK SHARING, RULE OF LAW, RURAL BANKS, SAVINGS SCHEMES, SECURITIES, SHARE OF ASSETS, SHAREHOLDERS, STOCK MARKET, STOCK MARKET CAPITALIZATION, STOCK MARKET DEVELOPMENT, STOCK MARKETS, SUPERVISORY POWER, TAX, TAX INCENTIVE, TECHNICAL ASSISTANCE, TRANSITION COUNTRIES, TRANSITION ECONOMIES, UNEMPLOYMENT,
Online Access:	http://documents.worldbank.org/curated/en/2013/10/18403525/cheese-synthesizing-giant-literature-causes-consequences-financial-sector-development https://hdl.handle.net/10986/16870
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