The study examined the relationship between financial intermediation and poverty in
selected developing countries. In particular the study sought to examine the
deterministic relationship, cointegration and the causality between financial
intermediation and poverty. Panel data spanning the period 2004-2016 for 35
developing countries was employed. Substantial empirical research proposed that
financial development expands economic prospects and reduces poverty and
inequality. Hitherto, there is a dearth of empirical studies on the potential effects of
formal financial dimensions of financial access, financial efficiency and financial
stability in reducing poverty. There is also a lack of empirical work on the joint effect
of the other financial dimensions in a financial intermediation setting in poverty
reduction. The present study contributed to literature by including these financial
dimensions in examining cointegration and causality between financial dimensions
and poverty. The study employed a number of econometric methodologies to address
the objectives of the research such as the GMM, panel ARDL and panel ECM. The
GMM was employed to examine the determinants of poverty that were selected for
this study. To examine the long run, short run and the causal relationship, the panel
ARDL and the error correction model were used. In addition the study deployed PCA
to develop the composite index for institutional quality. Panel heterogenous estimation
methods such as the pooled mean group to infer the cointegration and causal effect
between the financial dimensions and poverty were employed. The Hausman test was
used to determine the most appropriate estimator and the PMG estimator was
selected as the most appropriate since the p-value of the Hausman test was
insignificant. The results from panel ARDL, cointegration test showed the existence of
a long run relationship between financial intermediation, financial access, financial
efficiency, financial access and poverty. Furthermore, the study noted that the
relationship between financial intermediation and poverty differ depending on how
poverty is measured. Therefore, the distortions in understanding and definition of
poverty may consequently lead to distorted policies that yield little or no results for the
effectiveness of the financial sector in poverty reduction.The study found strong
causality in the long run for all the poverty proxies and the selected financial variables.
Additionally the results from the panel causality tests indicate the bidirectional
causality of the variables in the long run. We fail to observe the causality among most
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of the variables in the short run. There is strong joint causality among the variables in
the panel as the results of the error correction term is negative and significant
indicating that there is dynamic stability between the financial variables and poverty.
The study further included the domestic public debt and remittances as determinants
of poverty in a financial intermediation setting. Since domestic public debt can crowd
out private credit, this study included domestic public debt for the panel of the
developing countries and the study found that domestic public debt has a poverty
reducing effect. Additionally the study found that remittances reduce the share of
population living in poverty whilst increasing inequality as indicated in the findings of
the study. / Finance, Risk Management and Banking
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:unisa/oai:uir.unisa.ac.za:10500/27086 |
| Date | 07 1900 |
| Creators | Magwedere, Margaret Rutendo |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | application/pdf |
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