Cross country evidence on the linkages between financial development and poverty

    Research output: Contribution to journalArticle

    Abstract

    This paper presents empirical evidence of a direct relationship between financial development and poverty. The empirical modeling employs an efficient panel data estimation technique called fixed effect vector decomposition (FEVD) which is applied to a poverty determination model designed to explain poverty in term of financial development and financial instability. This technique can efficiently estimate time-invariant and rarely changing variable which traditional panel data models cannot. Using panel data the study finds that on average financial development is conducive for poverty reduction but the instability accompanying financial development is detrimental to the poor. This result holds for both measures of financial development namely the ratio of money to GDP (M3-GDP) and the ratio credit to GDP.
    Original languageEnglish
    Pages (from-to)3-19
    Number of pages17
    JournalInternational Journal of Business and Management
    Volume5
    Issue number1
    Publication statusPublished - 2010

    Keywords

    • economic conditions
    • poverty

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