1. Home
  2. Volume 5 • Issue 1
  3. Financial development, human capital and its impact on economic growth of emerging countries
New submission
Issues
Journal Information
Aims and ScopeEditorial BoardEditorial Advisory BoardJournal Policies
Resources
For Readers
For Authors
For Editors
For Reviewers
Publication EthicsCall for Special Issue
ISSN
ISSN 2615-9821
ISSN(Previous) 2588-1396

Volume 5 • Issue 1 | March 2021

Financial development, human capital and its impact on economic growth of emerging countries

Aaqib Sarwar, Muhammad Asif Khan, Zahid Sarwar, Wajid Khan

06/04/2021 155 0 0
Like Buy now 20.000 đ
Financial development System GMM Economic growth Emerging countries Human capital

Abstract:

Purpose – This paper aims to investigate the critical aspect of financial development, human capital and their interactive term on economic growth from the perspective of emerging economies.

Design/methodology/approach – Data set ranged from 2002 to 2017 of 83 emerging countries used in this research and collected from world development indicators of the World Bank. The two-step system generalized method of moments is used to conduct this research within the endogenous growth model while controlling time and country-specific effects.

Findings – The findings of the study indicate that financial development has a positive and significant effect on economic growth. In emerging countries, human capital also has a positive impact on economic growth. Financial development and human capital interactively affect economic growth for emerging economies positively and significantly.

Research limitations/implications – The data set is limited to 83 emerging countries of the world. The time period for the study is 2002 to 2017.

Originality/value – This research contributes to the existing literature on human capital, financial development and economic growth. Limited research has been conducted on the impact of financial development and human capital on economic growth.

References:

  1. Acaravci, S.K., Ozturk, I. and Acaravci, A. (2009), “Financial development and economic growth: literature survey and empirical evidence from sub-Saharan African countries”, South African Journal of Economic and Management Sciences, Vol. 12 No. 1, pp. 11-27.
  2. Barro, R.J. (1991), “Economic growth in a cross-section of countries”, The Quarterly Journal of Economics, Vol. 106 No. 2, pp. 407-443.
  3. Barro, R.J. (2001), “Human capital and growth”, American Economic Review, Vol. 91 No. 2, pp. 12-17.
  4. Barro, R.J. and Lee, J.W. (1996), “International measures of schooling years and schooling quality”, The American Economic Review, Vol. 86 No. 2, pp. 218-223.
  5. Barro, R.J. and Sala-I-Martin, X. (1999), Economic Growth, The MIT Press, Cambridge.
  6. Blundell, R. and Bond, S. (1998), “Initial conditions and moment restrictions in dynamic panel data models”, Journal of Econometrics, Vol. 87 No. 1, pp. 115-143.
  7. Blundell, R., Dearden, L., Meghir, C. and Sianesi, B. (1999), “Human capital investment: the returns from education and training to the individual, the firm and the economy”, Fiscal Studies, Vol. 20 No. 1, pp. 1-23.
  8. Bosworth, B. and Collins, S.M. (2003), “The empirics of growth: an update”, Brookings Papers on Economic Activity, Vol. 2003 No. 2, pp. 113-206.
  9. Boyreau-Debray, G. (2003), Financial Intermediation and Growth: Chinese Style, The World Bank.
  10. Demirgüç-Kunt, A. and Maksimovic, V. (2005), Financial Constraints, Uses of Funds, and Firm Growth: An International Comparison, The World Bank.
  11. Diamond, D.W. and Dybvig, P.H. (1983), “Bank runs, deposit insurance, and liquidity”, Journal of Political Economy, Vol. 91 No. 3, pp. 401-419.
  12. Eita, J.H. and Jordaan, A.C. (2010), “A causality analysis between financial development and economic growth for Botswana”, African Finance Journal, Vol. 12 No. 1, pp. 72-89.
  13. Evans, D.A., Green, C.J. and Murinde, V. (2002), “Human capital and financial development in economic growth: new evidence using the translog production function”, International Journal of Finance and Economics, Vol. 7 No. 2, pp. 123-140.
  14. Fischer, S. (1991), “Growth, macroeconomics, and development”, NBER Macroeconomics Annual, Vol. 6, pp. 329-364.
  15. Fry, M.J. (1980), “Saving, investment, growth and the cost of financial repression”, World Development, Vol. 8 No. 4, pp. 317-327.
  16. Hakeem, M. (2010), “Banking development, human capital and economic growth in sub-Saharan africa (SSA)”, Journal of Economic Studies, Vol. 37 No. 5, pp. 557-577.
  17. Hansen, L.P. (1982), “Large sample properties of generalized method of moments estimators”, Econometrica, Vol. 50 No. 4, pp. 1029-1054.
  18. Ibrahim, M. (2018), “Interactive effects of human capital in finance–economic growth nexus in sub-Saharan africa”, Journal of Economic Studies, Vol. 45 No. 6, pp. 1192-1210.
  19. Jalles, J.T. (2016), “A new theory of innovation and growth: the role of banking intermediation and corruption”, Studies in Economics and Finance, Vol. 33 No. 4, pp. 488-500.
  20. Kendall, J. (2012), “Local financial development and growth”, Journal of Banking and Finance, Vol. 36 No. 5, pp. 1548-1562.
  21. Khan, M.S. and Senhadji, A.S. (2003), “Financial development and economic growth: a review and new evidence”, Journal of African Economies, Vol. 12 No. 2, pp. 89-110.
  22. Khan, M.A., Siddique, A. and Sarwar, Z. (2020), “Determinants of non-performing loans in the banking sector in developing state”, Asian Journal of Accounting Research, Vol. 5 No. 1.
  23. King, R.G. and Levine, R. (1993), “Finance and growth: Schumpeter might be right”, The Quarterly Journal of Economics, Vol. 108 No. 3, pp. 717-737.
  24. Knowles, S., Lorgelly, P.K. and Owen, P.D. (2002), “Are educational gender gaps a brake on economic development? Some cross-country empirical evidence”, Oxford Economic Papers, Vol. 54 No. 1, pp. 118-149.
  25. Levine, R. (1997), “Financial development and economic growth: views and agenda”, Journal of Economic Literature, Vol. 35 No. 2, pp. 688-726.
  26. Levine, R. (2005), “Finance and growth: theory and evidence”, Handbook of Economic Growth, Vol. 1, pp. 865-934.
  27. Li, H. and Liang, H. (2010), “Health, education, and economic growth in east asia”, Journal of Chinese Economic and Foreign Trade Studies, Vol. 3 No. 2, pp. 110-131.
  28. Lucas, R.E. Jr (1988), “On the mechanics of economic development”, Journal of Monetary Economics, Vol. 22 No. 1, pp. 3-42.
  29. Mankiw, N.G., Romer, D. and Weil, D.N. (1992), “A contribution to the empirics of economic growth”, The Quarterly Journal of Economics, Vol. 107 No. 2, pp. 407-437.
  30. Masoud, N. and Hardaker, G. (2012), “The impact of financial development on economic growth: empirical analysis of emerging market countries”, Studies in Economics and Finance, Vol. 29 No. 3, pp. 148-173.
  31. Montiel, P.J. (2011), Macroeconomics in Emerging Markets, Cambridge University Press.
  32. Munir, K. and Arshad, S. (2018), “Factor accumulation and economic growth in Pakistan: incorporating human capital”, International Journal of Social Economics, Vol. 45 No. 3, pp. 480-491.
  33. Neeliah, H. and Seetanah, B. (2016), “Does human capital contribute to economic growth in Mauritius?”, European Journal of Training and Development, Vol. 40 No. 4, pp. 248-261.
  34. Nyasha, S. and Odhiambo, N.M. (2015), “Economic growth and market-based financial systems: a review”, Studies in Economics and Finance, Vol. 32 No. 2, pp. 235-255.
  35. Phiri, A. (2015), “Asymmetric cointegration and causality effects between financial development and economic growth in South Africa”, Studies in Economics and Finance, Vol. 32 No. 4, pp. 464-484.
  36. Romer, P.M. (1986), “Increasing returns and long-run growth”, Journal of Political Economy, Vol. 94 No. 5, pp. 1002-1037.
  37. Rosendo Silva, F., Simões, M. and Sousa Andrade, J. (2018), “Health investments and economic growth: a quantile regression approach”, International Journal of Development Issues, Vol. 17 No. 2, pp. 220-245.
  38. Rousseau, P.L. (2003), “Historical perspectives on financial development and economic growth”, Review, Vol. 85 No. 4, pp. 81-106.
  39. Rousseau, P.L. and Sylla, R. (2005), “Emerging financial markets and early US growth”, Explorations in Economic History, Vol. 42 No. 1, pp. 1-26.
  40. Schumpeter, J. (1911), Theory of Economic Development, Harvard University Press, Cambridge, MA.
  41. Sehrawat, M. and Giri, A.K. (2015), “Financial development and economic growth: empirical evidence from India”, Studies in Economics and Finance, Vol. 32 No. 3, pp. 340-356.
  42. Sehrawat, M. and Giri, A.K. (2016), “The impact of financial development on economic growth: evidence from SAARC countries”, International Journal of Emerging Markets, Vol. 11 No. 4, pp. 569-583.
  43. Sehrawat, M. and Giri, A.K. (2017), “Does female human capital contribute to economic growth in India? An empirical investigation”, International Journal of Social Economics, Vol. 44 No. 11, pp. 1506-1521.
  44. Shahid, A., Saeed, H. and Tirmizi, S.M.A. (2015), “Economic development and banking sector growth in Pakistan”, Journal of Sustainable Finance and Investment, Vol. 5 No. 3, pp. 121-135.
  45. World Bank (2012), The World Bank Annual Report 2012, The World Bank.
  46. Young, A. (1995), “The tyranny of numbers: confronting the statistical realities of the East Asian growth experience”, The Quarterly Journal of Economics, Vol. 110 No. 3, pp. 641-680.
  47. Further reading
  48. Goldsmith, R.W. (1969), Financial Structure and Development, Yale Uni. Press, New Haven, CT.
  49. Knowles, S., Lorgelly, P.K. and Owen, P.D. (2002), “Are educational gender gaps a brake on economic development? Some cross-country empirical evidence”, Oxford Economic Papers, Vol. 54 No. 1, pp. 118-149.
  50. McKinnon, R.I. (1973), Money and Capital in Economic Development, Brookings Institute Press,Washington, DC.
  51. Shaw, E. (1969), Financial Deepening in Economic Development, Oxford University Press, New York, NY.
  52. Valickova, P., Havranek, T. and Horvath, R. (2015), “Financial development and economic growth: a meta-analysis”, Journal of Economic Surveys, Vol. 29 No. 3, pp. 506-526.
  53. World Bank (2012), Global Financial Development Report 2013: Rethinking the Role of theStateinFinance, WorldBankPublications. https://openknowledge.worldbank.org/handle/10986/11848.

 

Related articles