Syed Zulfiqar Ali Shah and Nousheen Tariq BhuttaIn (2014) the last
century, mostly countries promote the sustainable financial development
for enhancing economic growth through lowering the governmental
inventions in financial sector. This paper portrays the impact of financial
deepening on positive and negative perspectives however it may severely
affect developing economies as compared to developed economies.
Although financial deepening provides many positive outcomes to
economies like enhancing the hiding costs, efficiency of transforming
savings into investments, heightening the official governmental policies
through deregulating credits, strengthening restrains interest rate, price
mechanisms as well as improving market competition; but sometimes
excess financial deepening may leads to negative outcomes like
restraining the financial markets to be efficient, reducing the profit margin
and increased financial fragility of banks and may create financial crises if
excessive risks is taken in presence of increased competition. It provides
recommendations for eliminating its effects and enhances the sustainable
development,in both developed and developing economies.
Shankha Chakraborty (2019) This article proposes a tractable model of the
evolution of financial structure. Firms invest out of internal assets and by
borrowing from banks and the financial market. In the presence of moral
hazard, whereby owner–managers may intentionally reduce profitability of
investment to appropriate resources, banks can monitor firms and
partially alleviate agency problems. Under the optimal financial contract,
banks monitor and outside investors lend to firms only if they borrow from
banks too. The model is broadly consistent with financial development
facts. Capital accumulation is facilitated by an increasing reliance on both
types of external finance. Initially firms rely more heavily on expensive
bank finance. With further development, banks eliminate much of the
agency problem and firms substitute in favour of cheaper market finance.
The short- and long-run effects of financial sector reforms are considered.
David Daokui Li (2021) The cultivation and regulation of the
financial system has been a key component of the Chinese
economy’s reform and opening-up process over the past 40 years.
In this section, we will focus on some stylized facts and provide a
brief history of the cultivation and regulation of the financial
system over the past 40 years of reform and opening-up before
summarizing some economic lessons we can learn from this
process. Our main argument is that the steady progress of local-
currency-based financial deepening is essential for fast
investment in the real economy and channeling savings into
investment. However, financial deepening is based on financial
stability, which requires the government to proactively monitor
and mitigate financial risk.
João Manoel P. De Mello (2012) Since the conquest of hyperinflation, with
the Real Plan, in 1994, the Brazilian financial system has grown from
early infancy to late adolescence. We describe the process of maturing
with emphasis on the defining features of the Brazilian financial
system over the last 20 years: (1) stabilization and the subsequent
financial crisis; (2) universality of banks; (3) market segmentation
through public lending; (4) institutional improvement. Further
paraphrasing Diaz-Alejandro (1985), we raise some hypotheses on why,
this time, the financial boom has not (at least yet) turned into a financial
crash.
Yingying Tian (2025) It's important to consider that the digital economy
(DE) may contribute to solving energy poverty (EP). Does a significant
relationship exist between energy poverty and the DE, an innovative
industrial form defined by digital technology? What exactly is the
working mechanism inside? In this paper, we take 25 regions in China as
our research object and conduct a systematic investigation into the
effects of digital commerce on energy poverty by creating a role in the
mediation model, conducting a spatial autocorrelation assessment, and
conducting various analyses. Three main findings emerged from the
research: (1) energy poverty is positively correlated with geography, and
(2) financial growth represents a number of the processes that contribute
to decreasing energy poverty, the secondary influence in the China areas
is essential; (3) the DE have an essential prevention impact on energy
poverty, but this effect varies by region and is most pronounced
according to a high degree of digital economic growth. Furthermore, this
study offers policy recommendations for reducing energy poverty
through expanding the DE, including financial advancement.
Purpose Roseline Misati (2024)
The purpose of this paper is to examine the effect of digital
financial innovation on financial depth and economic growth in
Kenya.
Design/methodology/approach
The study utilized autoregressive distributed lag (ARDL) model,
which is preferable over other time series methods as the model
allows application of co-integration tests to time series with
different integration orders and is flexible to the sample size
including small and finite.
Findings
The main findings of this paper are as follows: first, there is
evidence of a positive relationship between digital financial
innovation and financial depth with the strongest impact
emanating from Internet usage and mobile financial services and
the lowest impact from bank branches; second, the results reveal
a significant positive impact of financial depth on economic
growth consistent with the supply-leading finance theory.
Practical implications
The results of the study imply a need for investment in
technology-enabling infrastructure for digital financial services
(DFS) and a redesign of strategies to avoid further financial
exclusion of low-income earners due to the unaffordability of
digital devices and financial and digital illiteracy.
Originality/value
The study is original and important for policymakers as the study
provides insights on the components of financial innovation that
are growth-enhancing in Kenya, considering that some aspects of
innovation can be growth-retarding as was demonstrated during
the global financial crisis.
Purpose
This paper investigates the impact of institutional factors on
financial deepening and its implications on bank credit in Africa.
Design/methodology/approach
The paper employs different panel econometric models to
examine the heterogeneity of 50 African countries from 2000 to
2019. The estimators include panel corrected standard errors,
system generalized method of moments, quantile and threshold
regressions.
Findings
The results show that rule of law, regulatory quality, government
effectiveness, voice and accountability, control of corruption and
political stability significantly influence financial deepening in
Africa. However, government effectiveness has a higher effect on
middle- and high-income countries, while other indicators have a
high impact on low-income countries. All institutional indicators
have stronger effects, almost double, at higher financial depth
levels than for countries with lower levels. Government
effectiveness and regulatory quality impact financial deepening
more for countries with strong institutions than weak ones. Thus,
the relationship between institutional qualities and credit
provided by banks is non-monotonic.
Practical implications
The findings suggest that strengthening appropriate institutional
factors based on country heterogeneity may effectively stimulate
debt financing in Africa, the primary source of financing for small
and medium-sized enterprises and entrepreneurs.
Originality/value
The novelty of this paper is that previous studies did not
sufficiently scrutinize the heterogeneity of the structure of African
economies – i.e. differences in institution, credit and income
levels.
Bahati Sanga (2023) Abstract
Purpose
This paper investigates the impact of institutional factors on financial deepening and its
implications on bank credit in Africa.
Design/methodology/approach
The paper employs different panel econometric models to examine the heterogeneity of 50
African countries from 2000 to 2019. The estimators include panel corrected standard errors,
system generalized method of moments, quantile and threshold regressions.
Findings
The results show that rule of law, regulatory quality, government effectiveness, voice and
accountability, control of corruption and political stability significantly influence financial
deepening in Africa. However, government effectiveness has a higher effect on middle- and
high-income countries, while other indicators have a high impact on low-income countries.
All institutional indicators have stronger effects, almost double, at higher financial depth
levels than for countries with lower levels. Government effectiveness and regulatory quality
impact financial deepening more for countries with strong institutions than weak ones. Thus,
the relationship between institutional qualities and credit provided by banks is non-
monotonic.
Practical implications
The findings suggest that strengthening appropriate institutional factors based on country
heterogeneity may effectively stimulate debt financing in Africa, the primary source of
financing for small and medium-sized enterprises and entrepreneurs.
Originality/value
The novelty of this paper is that previous studies did not sufficiently scrutinize the
heterogeneity of the structure of African economies – i.e. differences in institution, credit and
income levels.
Keshab Bhattarai (2015) While over-financing caused crises and slow growth
in advanced economies including Germany, France and the UK after 2008,
more prudent financial deepening sustained higher economic growth in
China and India—two major emerging economies in the world. The actual
financial deepening ratios (AFDR) observed in the non-consolidated
balance sheet from the OECD exceeded by factors of 3.5, 2.4 and 5.1 the
optimal financial deepening ratios (OFDR) obtained from the solutions of
dynamic general equilibrium (DGE) models of those three advanced
economies. The corresponding factors were 2.3 and 0.49 for China and
India respectively. Labor intensive production technology and a low OFDR
relative to a high AFDR in China allowed it to grow at 10% between 1990
and 2010 period that ended with the global financial crisis. With a
reasonable OFDR and low AFDR India also managed to grow at 6.5%. Thus
huge gaps between the optimal and actual financial deepening ratios led
to massive macroeconomic consequences as observed after the crises in
2008. Smooth, sustainable and efficient economic growth requires
adoption of strategies for separating equilibria in line of Miller–Stiglitz–
Roth mechanisms avoiding problems of asymmetric information in the
process of financial intermediation with as narrower gaps as possible
between the AFDRs and OFDRs.
Chun-Yu Ho (2018) This study investigates the effects of financial
deepening on innovation for various democratic levels of political
institutions using panel data from 74 countries spanning 1970–2010. Our
results show that banking market deepening is associated with increased
innovation only when political institutions are sufficiently democratic. In
contrast, the enhancing effect of stock market deepening on innovation
requires a lower level of political democracy. Further, we find that
increasing the state's openness and competitiveness in the executive
recruitment of leaders is the main channel through which political
democratization promotes the role of banking and stock markets for
financing innovation. Our results are robust to the use of the
instrumental variable approach; alternative measures for financial
deepening, democracy and innovation input; long-differenced variables;
and alternative specifications.
