Domestic Financial Development in Emerging Economies: Evidence and Implications

63 Pages Posted: 22 Apr 2009

See all articles by Ettore Dorrucci

Ettore Dorrucci

European Central Bank (ECB)

Alexis Meyer-Cirkel

Goethe University Frankfurt

Daniel Santabárbara

Banco de España

Date Written: April 20, 2009

Abstract

We construct, on the basis of an original methodology and database, composite indices to measure domestic financial development in 26 emerging economies, using mature economies as a benchmark. Twenty-two variables are used and grouped according to three broad dimensions: (i) institutions and regulations; (ii) size of and access to financial markets and (iii) market performance. This new evidence aims to fill a gap in the economic literature, which has not thus far developed comparable time series including both emerging and mature economies. In doing so, we provide a quantitative measure of the - usually considerable - scope for the selected emerging countries and regions to “catch up” in financial terms. Moreover, we find evidence that a process of financial convergence towards mature economies has already started in certain emerging economies. Finally, we conduct an econometric analysis showing that different levels of domestic financial development tend to be associated with the building up of external imbalances across countries.

Keywords: Financial development, index construction, commodity and oil-exporting, countries, G20, major emerging economies, financial catching up, global imbalances

JEL Classification: F3, F4, G1, G2, E21, E22, C82

Suggested Citation

Dorrucci, Ettore and Meyer-Cirkel, Alexis and Santabárbara, Daniel, Domestic Financial Development in Emerging Economies: Evidence and Implications (April 20, 2009). ECB Occasional Paper No. 102, Available at SSRN: https://ssrn.com/abstract=1325243 or http://dx.doi.org/10.2139/ssrn.1325243

Ettore Dorrucci (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 13440 (Phone)
+44 69 1344 6000 (Fax)

Alexis Meyer-Cirkel

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Daniel Santabárbara

Banco de España ( email )

C/ Alcalá, 48
Madrid, 28014
Spain

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