Financial Development, Rule of Law and Wealth Inequality: Bayesian Model Averaging Evidence

39 Pages Posted: 22 Aug 2017 Last revised: 18 Nov 2021

See all articles by Roman Horvath

Roman Horvath

Charles University in Prague; IOS Regensburg; Université de Nice Sophia Antipolis - Groupe de Recherche en Droit, Economie et Gestion (GREDEG); University of Saint Etienne - Analysis Group and Economic Theory Lyon St-Etienne (GATE-LSE)

Eva Horvatova

affiliation not provided to SSRN

Maria Siranova

University of Economics in Bratislava

Date Written: August 21, 2017

Abstract

We examine the determinants of financial development using our global sample and employing a rich set of measures of financial development that assess the degree of depth, access, stability and efficiency of financial intermediaries. We use Bayesian model averaging to test competing theories within this unifying framework. Examining nearly 40 potential determinants of financial development, we find that the rule of law and the level of economic development are the most important. Wealth inequality is irrelevant for banking sector development but positively associated with stock market development. Finally, our results suggest that financial market regulations matter for stock market efficiency and financial stability.

JEL Classification: G10, G20

Suggested Citation

Horvath, Roman and Horvatova, Eva and Siranova, Maria, Financial Development, Rule of Law and Wealth Inequality: Bayesian Model Averaging Evidence (August 21, 2017). BOFIT Discussion Paper No. 12/2017, Available at SSRN: https://ssrn.com/abstract=3023930 or http://dx.doi.org/10.2139/ssrn.3023930

Roman Horvath (Contact Author)

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

IOS Regensburg

Landshuter Str. 4
Regensburg, 93047
Germany

Université de Nice Sophia Antipolis - Groupe de Recherche en Droit, Economie et Gestion (GREDEG)

250, rue Albert Einstein
Valbonne, 06560
France

University of Saint Etienne - Analysis Group and Economic Theory Lyon St-Etienne (GATE-LSE)

Lyon
France

Eva Horvatova

affiliation not provided to SSRN

Maria Siranova

University of Economics in Bratislava ( email )

Dolnozemská cesta 1
Bratislava, 852 35
Slovakia

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