Impact of financial development on SAARC’S human development

Impact of financial development on SAARC’S human development The objective of the study is to investigate the link between economic growth and financial development (i.e., broad money supply, credit to private sector (CPS) and bank deposit liabilities) in human development for a panel of selected South Asian Association for Regional Cooperation (SAARC) countries; namely, Bangladesh, India, Nepal, Pakistan and Sri Lanka during 1988–2008; over the period of 1988–2008. The panel cointegration technique is employed for analysis of short and long-run relationship between the variables. The results of panel cointegration found that there is a long-run relationship between financial development indicators and economic growth in human development in SAARC region. The estimated results indicate that in the short run, bank deposit liabilities exerts the maximum impact (i.e., 0.425 %) on human development in SAARC region, subsequently, broad money supply (i.e., 0.301 %) and CPS (i.e., 0.128 %) respectively, while there is a negative relationship between real GDP growth and human capital (i.e., $$-$$ - 0.189 %). In the long-run, DOLS estimator constitutes broad money supply which increases by 0.912 %, followed by credit to private sector (i.e., 0.121 %) on human development. While, in case of FMOLS estimator, these results are disappear, as broad money supply does not have any significant impact on human development in SAARC region. The coefficient of real GDP per capita in both estimators, have a negative impact on human development, however, the intensity of both estimators are different in nature, as real GDP per capita decrease human development in FMOLS (i.e., $$-$$ - 0.828 %) and in DOLS estimators (i.e., 0.458 %). The results indicate that due to a low quality of human capital in SAARC region; the direct effect of economic growth becomes negative; however, financial development indicators act as an important driver for increase in human capital in SAARC region. The implications of present research relate to heightening the need for labor market reforms and making the educational system more flexible. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Quality & Quantity Springer Journals

Impact of financial development on SAARC’S human development

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Publisher
Springer Journals
Copyright
Copyright © 2013 by Springer Science+Business Media Dordrecht
Subject
Social Sciences, general; Methodology of the Social Sciences; Social Sciences, general
ISSN
0033-5177
eISSN
1573-7845
D.O.I.
10.1007/s11135-013-9926-1
Publisher site
See Article on Publisher Site

Abstract

The objective of the study is to investigate the link between economic growth and financial development (i.e., broad money supply, credit to private sector (CPS) and bank deposit liabilities) in human development for a panel of selected South Asian Association for Regional Cooperation (SAARC) countries; namely, Bangladesh, India, Nepal, Pakistan and Sri Lanka during 1988–2008; over the period of 1988–2008. The panel cointegration technique is employed for analysis of short and long-run relationship between the variables. The results of panel cointegration found that there is a long-run relationship between financial development indicators and economic growth in human development in SAARC region. The estimated results indicate that in the short run, bank deposit liabilities exerts the maximum impact (i.e., 0.425 %) on human development in SAARC region, subsequently, broad money supply (i.e., 0.301 %) and CPS (i.e., 0.128 %) respectively, while there is a negative relationship between real GDP growth and human capital (i.e., $$-$$ - 0.189 %). In the long-run, DOLS estimator constitutes broad money supply which increases by 0.912 %, followed by credit to private sector (i.e., 0.121 %) on human development. While, in case of FMOLS estimator, these results are disappear, as broad money supply does not have any significant impact on human development in SAARC region. The coefficient of real GDP per capita in both estimators, have a negative impact on human development, however, the intensity of both estimators are different in nature, as real GDP per capita decrease human development in FMOLS (i.e., $$-$$ - 0.828 %) and in DOLS estimators (i.e., 0.458 %). The results indicate that due to a low quality of human capital in SAARC region; the direct effect of economic growth becomes negative; however, financial development indicators act as an important driver for increase in human capital in SAARC region. The implications of present research relate to heightening the need for labor market reforms and making the educational system more flexible.

Journal

Quality & QuantitySpringer Journals

Published: Sep 14, 2013

References

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