Financial Sector Development, Savings and Economic Performance: A Theoretical Analysis
DOI:
https://doi.org/10.47941/ijf.1583Keywords:
Financial Sector Development, Savings, Economic PerformanceAbstract
Purpose: This paper investigates the intricate relationship between financial sector development (FSD), savings behavior (SB), and economic performance (EP). Motivated by the critical role of the financial sector in economic development, our research aims to understand the nature of this relationship, addressing existing gaps in the literature.
Methodology: The methodology used involves a literature review, the development of a theoretical model with clearly stated assumptions, and the formulation of a mathematical model to represent the relationships between key variables. A deductive approach to theoretical analysis is employed for the discussion and interpretation of findings, along with implications for policy and future research directions.
Findings: The proposed theoretical model assumes rational economic agents, efficient financial markets, perfect information, and other factors to analyze these relationships. Mathematically, FSD positively influences SB, subsequently enhancing EP indicators like GDP growth, income distribution, and employment. The discussion aligns findings with existing literature, emphasizing implications for policymakers to prioritize FSD, enhance financial literacy, and incentivize savings.
Unique contributor to theory, policy and practice: Acknowledging model limitations, future research should validate findings empirically, considering diverse economic conditions. This model contributes to understanding dynamic economic interactions, guiding empirical investigations and policy formulation concisely.
Downloads
References
Allen, F., Qian, J., & Qian, M. (2018). Financial Markets and Corporate Saving. NBER Working Paper No. 24934.
Beck, T., & Demirguc-Kunt, A. (2006). Small and Medium-Size Enterprises: Access to Finance as a Growth Constraint. Journal of Banking & Finance, 30(11), 2931-2943.
Beck, T., Degryse, H., & Kneer, E. (2020). Is More Finance Better? Disentangling Intermediation and Size Effects of Financial Systems. Review of Finance, 24(2), 349-380.
Chen, C., Lee, Y., & Lin, C. (2021). Corporate Savings and Firm Performance. International Review of Economics & Finance, 71, 47-65.
Claessens, S., Coleman, N., & Donnelly, M. (2019). "Macro-Prudential" Policies: A Comparative Review. Journal of Financial Stability, 40, 70-82.
Claessens, S., Coleman, N., & Donnelly, M. P. (2019). The impact of financial sector resilience on economic performance during crises. Journal of Financial Stability, 40, 103-118.
Claessens, S., Ghosh, S., & Mihet, R. (2019). Financial Globalisation, Financial Crises, and the Risk Premium on Financial Assets. European Economic Review, 114, 18-44.
Claessens, S., Ghosh, S., & Mihet, R. (2019). Mobile banking and fintech: Evidence from developing countries. Journal of Financial Stability, 42, 48-59.
Cull, R., Demirgüç-Kunt, A., & Morduch, J. (2018). Financial Inclusion and Poverty: The Impact of Digital Financial Services. The World Bank Research Observer, 33(2), 1-26.
Cull, R., Demirgüç-Kunt, A., & Morduch, J. (2018). Financial innovation and household behavior. Annual Review of Economics, 10, 309-334.
Demirguc-Kunt, A., & Maksimovic, V. (1998). Law, Finance, and Firm Growth. Journal of Finance, 53(6), 2107-2137.
Demirguc-Kunt, A., & Maksimovic, V. (1998). Law, finance, and firm growth. Journal of Finance, 53(6), 2107-2137.
Feldstein, M. (1974). Social Security, Induced Retirement, and Aggregate Capital Accumulation. Journal of Political Economy, 82(5), 905-926.
Feldstein, M. S. (1974). Social security, induced retirement, and aggregate capital accumulation. Journal of Political Economy, 82(5), 905-926.
Gennaioli, N., Shleifer, A., & Vishny, R. (2015). Money Doctors. The Quarterly Journal of Economics, 130(4), 1547-1593.
Gennaioli, N., Shleifer, A., & Vishny, R. W. (2015). Neglected risks, financial innovation, and financial fragility. Journal of Financial Economics, 117(3), 520-529.
King, R. G., & Levine, R. (1993). Finance and Growth: Schumpeter Might Be Right. The Quarterly Journal of Economics, 108(3), 717-737.
King, R. G., & Levine, R. (1993). Finance, entrepreneurship and growth: Theory and evidence. Journal of Monetary Economics, 32(3), 513-542.
Levine, R. (2005). Finance and Growth: Theory and Evidence. Handbook of Economic Growth, 1, 865-934.
Levine, R. (2005). Finance and growth: Theory and evidence. In P. Aghion & S. Durlauf (Eds.), Handbook of Economic Growth (Vol. 1, pp. 865-934). Elsevier.
Modigliani, F., & Brumberg, R. (1954). Utility Analysis and the Consumption Function: An Interpretation of Cross-Section Data. In K. K. Kurihara (Ed.), Post-Keynesian Economics (pp. 388-436). New Brunswick, NJ: Rutgers University Press.
Modigliani, F., & Brumberg, R. (1954). Utility analysis and the consumption function: An interpretation of cross-section data. In K. Kurihara (Ed.), Post-Keynesian Economics (pp. 388-436). Rutgers University Press.
Obstfeld, M., & Taylor, A. M. (2002). Globalization and Capital Markets. NBER Working Paper No. 8846.
Rajan, R. G., & Zingales, L. (1998). Financial Dependence and Growth. American Economic Review, 88(3), 559-586.
Rajan, R. G., & Zingales, L. (1998). Financial dependence and growth. American Economic Review, 88(3), 559-586.
Schumpeter, J. A. (1911). The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle. Cambridge, MA: Harvard University Press.
Thaler, R. H. (1994). Quasi-rational economics. The American Economic Review, 84(2), 363-369.
World Bank. (2019). Global Financial Development Report 2019/2020: Bank Regulation and Supervision a Decade after the Global Financial Crisis. Washington, DC: World Bank.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Mystere Nzanzu Luvako
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
