Role of financial development on social development A case of low-income countries
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Date
2021-10-04
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UMT,Lahore
Abstract
The motive of this study is to investigate whether there is a linkage between financial
development, economic growth and social development. In order to achieve the study objective,
the relationship between financial development, social development and economic growth by
using both timeāseries and panel data from 29 low-income countries for the period 1990-2018.
The availability of data determined the choice of the sample. Which includes Poverty, Labour
Force total, Gross Fixed Capital Formation, Trade, Banking sector development, Stock market
development, School enrolment (Tertiary), and Domestic Credit are the constructs of financial
development and Gross Domestic Product, inflation and Gross National Income for economic
growth. Multiple regressions are applied to test the proposed hypotheses. The empirical findings
represent that only credit to the private sector has a positive and significant effect on economic
growth among the proxies of banking sector development. The study supports the prevalent view
that financial development and economic growth knowingly influence social development.
Given the evidence, we can reasonably argue that financial development contributes to the
economic growth of a country, which further leads to social development and well-being.