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Introducing a New Broad-based Index of Financial Development, Katsiaryna Svirydzenka

Abstract
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
Table Of Contents
Cover -- Contents -- Abstract -- I. Introduction -- II. Methodology -- A. Data sources -- B. Treatment of missing data -- C. Normalization and treatment of outliers -- D. Functional form of the aggregator -- E. Weights -- F. Putting it all together -- III. Landscape of Financial Development -- IV. Caveats and Limitations -- References -- Figures -- 1. Financial Development Index Pyramid -- 2. Treatment of Missing Data: Example 1 -- 3. Treatment of Missing Data: Example 2 -- 4. Databank Composition: Raw, Reconstructed, and Missing Data Shares -- 5. Linear Versus Geometric Aggregation: Hypothetical Example, Equal Weights -- 6. Linear Versus Geometric Aggregation: 2013 FD Index Ratings -- 7. Luxembourg Example: Index Ratings for 2013 -- 8. Principal Component Analysis: Normalized Weights -- 9. World Map of Financial Development, 2013 -- 10. Correlation of FD Index with Traditional Measures: Private Credit to GDP -- 11. Correlation of FD Index with Traditional Measures: Stock Market Capitalization/GDP -- 12. Financial Development through Time -- 13. Financial Development Index: Peer Group Averages -- 14. Financial Development Index: Selected Countries, 2013 -- Tables -- 1. Data Sources -- 2. Summary Statistics of the Underlying Data -- 3. Percent of Countries and Years with Data Availability -- 4. Share of Variance Explained by PCA Components -- 5. Summary Statistics of the Financial Development Index -- Annexes -- Annex 1. 2013 Country Rankings on Financial Development -- Annex 2. 2013 Country Rankings on Financial Institutions Depth, Access, Efficiency -- Annex 3. 2013 Country Rankings on Financial Markets Depth, Access, Efficiency
Language
eng
Literary Form
non fiction
Physical Description
1 online resource (44 pages)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781498313346

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