Introducing a New Broad-Based Index of Financial Development

By Katsiaryna Svirydzenka. Social Science Research Network, 2016

1,264 citations recorded by the source corpus.

There is a vast body of literature estimating the impact of financial development on economic growth, inequality, and economic stability. A typical empirical study approximates financial development with either one of two measures of financial depth - the ratio of private credit to GDP or stock market capitalization to GDP. However, these indicators do not take into account the complex multidimensional nature of financial development. The contribution of this paper is to create nine indices that summarize how developed financial institutions and financial markets are in terms of their depth, access, and efficiency. These indices are then aggregated into an overall index of financial development. With the coverage of 183 countries on annual frequency between 1980 and 2013, the database should offer a useful analytical tool for researchers and policy makers.

Subfields: Economics and Econometrics, Finance, Information Systems

View Paper: https://www.semanticscholar.org/paper/191be55d44a2467cb8561fd8675c8c3b95bda5b3

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Citations in the corpus

How important is GVC participation to export upgrading?* (2021, positive): “…World Table version 9; inflation rate which we take from the World Bank Development Indicators; institutional quality – proxied by the rule of law – sourced from the World Governance Indicators; and an index of Financial Development level which we source from the IMF database (Svirydzenka, 2016).”
Financial Inclusion and Economic GROWTH: An International Evidence (2019, methodology): “This database offers a useful analytical tool for researchers and policy makers (Svirydzenka 2016).”
The Impact of Financial Development on Carbon Emissions: A Global Perspective (2019, methodology): “Due to the length limitation, we do not further introduce the detailed construction process of this index, please refer to the original manuscript of Svirydzenka [41] for the complete information.”
Does financial development mitigate carbon emissions? Evidence from heterogeneous financial economies (2020, background): “However, financial development is a multifaceted concept (Svirydzenka, 2016); therefore, using different individual indicators of financial development could provide conflicting results in the literature.”
Financial development and environmental degradation: Do human capital and institutional quality make a difference? (2021, background): “Svirydzenka (2016) claim that the conventional measures of FD such as stock market capitalization and domestic credit could not capture all dimensions and sectors in the financial system.”
The Volatility of Capital Flows in Emerging Markets: Measures and Determinants (2017, background): “26 The higher the value of the index, the more financially developed is a country (see Svirydzenka (2016)).”
Financial Inclusion and Economic Growth: The Role of Governance in Selected MENA Countries (2021, methodology): “…the analysis by using measures that capture access using variables that combine access to financial markets and financial institutions, as calculated by the IMF’s Financial Development Database (Svirydzenka, 2016), as a broad measure of financial access reflecting access to bond and equity markets.”
Financial Development and Foreign Direct Investment—The Moderating Role of Quality Institutions (2020, methodology): “Thirdly, in this research, we employ the most comprehensive proxy for FD—the financial development index [32], as developed by the IMF [33]—which covers the depth, access, and efficiency of financial markets and institutions.”
The Rise of Socially Responsible Investment Funds: The Paradoxical Role of the Financial Logic (2019, methodology): “We used financial institution depth from the International Monetary Fund (Svirydzenka, 2016), which reflects the financial sector’s Figure 1.”
Inequality, ICT and financial access in Africa (2019, positive): “…financial activity (at banking and financial system levels), financial depth (money supply and financial system deposits or liquid liabilities) and financial size are used as measurements of financial access (Sahay et al., 2015; Svirydzenka, 2016; Asongu et al. 2016; Tchamyou & Asongu, 2017).”