Yes / This chapter examines the conceptual and measurement issues involving financial inclusion. Rest of the chapter is organised as follows. Section 2 defines the concept of financial inclusion. Section 3 briefly discusses the barriers to financial inclusion. The next section outlines measurement issues and data sources involving financial inclusion. Finally, the last section of the study concludes.

Despite the growing literature on financial development-economic growth nexus, there exists a paucity of empirical studies that explore the impact of financialisation on economic growth while focusing on the competitiveness of the financial sector. This study examines the revealed comparative advantages of 34 developing African countries from the period 2008 to 2017 and goes further to determine the impact of the revealed comparative advantage indices on economic growth. Revealed comparative advantage is used as an alternative proxy to financialisation, while economic growth is measured in terms of GDP per capita. In order to determine the impact, a panel study approach was followed, using a multiple linear regression model. The study produces two findings. Firstly, we find that the majority of African countries do not reveal a comparative advantage in financial services. This finding confirms our expectation. Secondly, we find that there exists a negative and significant relationship between financialisation and economic growth. The findings suggest that as developing countries in Africa gain comparative advantages in financial services, those gains have a detrimental impact on their economic growth. Informed by the findings of this study, which have implications for financial market development in Africa, the main recommendations are firstly that regulators need to play their part in reducing the cost of business for financial services institutions—particularly compliance costs, so as to encourage competition and development in the financial services sector, without compromising their responsibility to protect consumers. Secondly, better insights regarding cross-border trading and its impact on economic growth, profitability and the accumulation of foreign currency reserves need to be gained, in order to come up with more conducive regulatory frameworks that do not result in penalties for local firms, rendering them uncompetitive relative to foreign firms. Additionally, management at financial institutions have the responsibility of ensuring that benefits derived from their cross-border business go beyond shareholder value, but that reinvestment into the real economy takes place either through increased lending or equity investments and should also ensure that sufficient investments are made into the infrastructure required to increase the institution's competitiveness. Finally, Government and regulators needs to pay attention to how cross-border financial transactions are taxed, especially considering the new era of FinTech's, cryptocurrencies, and deepening regional integration, while at the same time ensuring that there is greater depth, bread and liquidity of their local financial markets.

My dissertation investigates three separate issues pertaining to a country's financial development. The first essay provides an introduction to the three essays. The second essay examines the combined effect of financial development and human capital on economic growth. While both financial development and human capital are individually positively correlated with growth, the literature has not emphasized their combined effect on growth. In this essay, I analyze the extent to which the effect of financial development on growth depends on a country's level of human capital. Using dynamic panel difference and system GMM, as well as the pooled OLS, I find that an increase in human capital decreases the impact of financial development on growth and that countries that lack financial development can achieve greater economic growth through an improvement in human capital. The third essay analyzes how currency unions affect the financial development of a country. This essay tests two forms of asymmetries on the effect of currency unions on financial development; I analyze if currency unions have an equal effect on various forms of financial development, and whether high-income and low-income countries are impacted differently. I find some evidence in favor of both forms of asymmetries with pooled OLS and fixed effect estimation using data on 152 countries and territories over the 1970-2006 time period. The fourth essay tests how financial development affects firms' export market participations and the volume of exports utilizing a firm-level data set which incorporates about 43,500 firms from 80 countries for the time period 2002-2009. Using an instrumental variable approach, I find that a country's financial development negatively affects the extensive margin of trade and positively affects the intensive margin of trade. Furthermore, this study finds that financial development has a disproportionate positive affect on firms with a higher level of external dependence for both margins of trade. Finally, I find that financial development exerts an asymmetric effect on young and mature firms in their export participations but not on the volume of exports.

This thesis is based on three empirical essays in financial development and economic growth. The first essay, investigated in the third chapter, the effect of financial development on economic growth in the context of Saudi Arabia, an oil-rich economy. In doing so, the study distinguishes between the effects of financial development on the oil and non-oil sectors of the economy. The Autoregressive Distributed Lag (ARDL) bounds test methodology is applied to yearly data over the period 1968 to 2010. The finding of this study is that financial development has a positive impact on the growth of the non-oil sector. In contrast, its impact on the oil-sector growth and total GDP growth is either negative or insignificant. This suggests that the relationship between financial development and growth may be fundamentally different in resource-dominated economies. The second essay revisited, in the fourth chapter, the relationship between financial development and economic growth in a panel of 52 middle-income countries over the 1980-2008 period. Using pooled mean group estimations in a dynamic heterogeneous panel setting, we show that there is an inverted U-shaped relationship between finance and growth in the long-run. In the short run, the relationship is insignificant. This suggests that too much finance can exert a negative influence on growth in middle-income countries. The finding of a non-monotonic effect of financial development on growth is confirmed by estimating a dynamic panel threshold model. The third essay empirically explores cross-country evidence of the effects of financial development shocks on economic growth. It employs a Global Vector Autoregressive (GVAR) model, which allows us to capture the dynamics of this relationship in a multi-country setting, and connects countries through bilateral international trade. Given the progressive role that Brazil, Russia, India, China and South Africa (BRICS) play in the world economic arena, this essay focuses on whether financial development in one BRICS member state affects economic growth in the other BRICS. To this end, the study finds empirical evidence that credit to the private sector has a positive spillover effect on growth in some of the BRICS countries. However, the results imply that the current level of financial integration among the BRICS countries is still not mature enough to spur economic growth for all the BRICS members.

This thesis investigates the impact of financial liberalisation policies on finance-growth relationship and financial crises. Analysis of recent trends and economic performance of financially developed and stable economies raises at least two very important questions that seem to have strong analytical connections. The first question is associated with the link between financial development and economic growth and the second question focuses the possible association between the policies of financial liberalisation and financial vulnerability. In this thesis we aim to shed light on some of the aspects that have gained so much attention from academics and policy makers during the last two decades. First we address whether excessive liberalisation has caused financial development to lose its effectiveness in generating economic growth. We employ a dynamic panel data analysis for 88 countries over the period of 1973 to 2005. Our index for the financial sector liberalisation covers seven aspects: credit controls and reserve requirements, interest rate controls, entry barriers, state ownership, policies on securities markets, banking regulations and restrictions on capital market. We use a comprehensive financial development indicator constructed through principal component analysis of five different indicators: bank private credit to GDP ratio, liquid liability to GDP ratio, deposit money bank assets to total bank assets ratio, deposit money bank assets to GDP ratio, and bank credit to bank deposit ratio. The results indicate that the positive effect of financial development on long-run growth continues to decline as the financial sector becomes more liberalised. Our results are robust to changes in the financial development indicators and the dis-aggregation of the financial liberalisation index. Second, we examine the possibility for an optimal sequence of financial sector reforms that may reduce an economy’s vulnerability to financial crises. We construct a distance measure from the countries that followed a more gradual approach and liberalised their capital account at a later stage. Our analysis shows that the experience of the countries that delayed or followed a very gradual approach for the liberalisation of their capital accounts have high level of implications to those countries that allowed for shock approach or liberalised their capital account before bringing reforms in other sectors.

This thesis argues that the financial sector played a positive, but limited role in British economic growth from 1850 to 1913. It examines empirically the role played by different types of financial institutions: commercial banks, stock markets and merchant banks. To this end, the thesis uses recently developed time series and dynamic panel methods for the econometric analysis, alongside new data on different parts of the financial system. The results suggest that at a national level, the growth of commercial banks had a limited impact on British economic development over the long run, and stock markets had no impact. However, changes in bank lending influenced economic growth to a significant extent in the short term. Growing conservatism in bank lending practices did not significantly increase credit constraints, as had been previously suspected. Findings from new geographically disaggregated data indicate that the spread of bank offices improved the economic performance of English and Welsh counties. Increased concentration of the banking industry did not hinder economic growth, a result that challenges widespread suggestions in the relevant literature. Moreover, the development of provincial stock exchanges – exchanges outside London - did not influence county-level economic growth, contrary to the view that they were important for the expansion of local industry. Finally, this thesis is the first to assess econometrically the role of merchant banks. It demonstrates that their trade financing activities were beneficial not only for the growth of British international trade, but also for that of the domestic economy.