Does foreign bank entry contribute to financial development? Examining the role of income thresholds. (10th July 2018)

• Record Type: Journal Article
• Authors: Gopalan, Sasidaran
• Is Part Of: Development policy review. Volume 36(2018:Mar.)Supplement 2
• Page Start: O954
• Page End: O983
• Publication Date: 2018-07-10
• Subjects: financial depth -- financial development -- foreign bank entry -- income thresholds; Developing countries -- Economic policy -- Periodicals; Economic assistance -- Developing countries -- Periodicals; Technical assistance -- Developing countries -- Periodicals; 338.91
• DOI: 10.1111/dpr.12286
• Languages: English
• ISSNs: 0950-6764

Abstract

Abstract: This article examines the relationship between foreign bank entry and financial development in a panel framework covering 57 emerging market and developing economies (EMDEs) between 1995 and 2009. Using various measures of financial sector deepening, the article also explores the degree to which the relationship between foreign bank entry and financial sector depth varies by different income thresholds of the EMDEs. The empirical findings suggest that while foreign banks have a direct positive impact in furthering financial depth, the marginal effects of foreign bank entry diminish over time with greater levels of economic development. In other words, the impact of foreign bank entry tends to diminish as the per capita income of the country rises.