Assessing the Relationship between Financial Globalization Uncertainty and Financial Development: Cross Country Empirical Evidence
Author: Salita

Financial sector development always remain central of attention in economic literature, past studies depict that financial globalization uncertainty is unfavorable for financial development. This study aims at examining the impact of financial globalization uncertainty on financial development in different type of market economies. The panel is divided into three sub-samples, it comprises of set 23 developed, 22 emerging and 20 frontier market economies for the period 1996 to 2016. To resolve the issue of endogeneity this study relays upon dynamic panel Generalized Method of Moments (GMM) for empirical scrutiny. To capture the Financial Globalization Uncertainty study takes into account both de-jure and de-facto measures, similarly Financial Development index is constructed by applying Principal Component Analysis (PCA). Empirical results verify that financial globalization uncertainty negatively affect financial development in each market economy i.e. developed, emerging and frontier. Set of control variables consists of inflation, Institutional Quality, investment and Trade Openness. Evidence demonstrates that Institutional Quality and investment have positive whereas inflation has adverse consequences for financial sector in each market. Trade Openness variable emerges as positive and significant for emerging and frontier markets. On the basis of empirical findings this study suggests that all market economies shall establish strong institutional setup to achieve higher financial development. Supervisor:- Dr Attiya Yasmin Javid

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Keywords : Dynamic Panel GMM, Institutional Quality, Market Economies, Principal Component Analysis
Supervisor: Attiya Yasmin Javid

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