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Investigating the Determinants of Financial Development in OPEC Countries: An Application of Bayesian Model Averaging Approach

Author

Listed:
  • Maryam Barzegar Marvasti

    (Zand Institute of Higher Education, Shiraz, Iran,)

  • Somayeh Razzaghi

    (Lecturer at Bu-Ali Sina University, Iran.)

Abstract

The purpose of this study is to investigate the most significant determinants of financial development in OPEC countries during 2014-2016. To this end, this paper considered 34 explanatory variables including several economic and policy variables determining four different aspects of financial development as the degree of depth, efficiency, stability and quality of financial services. In order to obtain more reliable results and overcome the uncertainty problem in this study, we applied Bayesian Model Averaging (BMA) technique. The results indicated that better institutional indicators such as rule of law, government effectiveness, and corruption avoidance are associated with greater financial depth, efficiency, and stability. More importantly, the results revealed that the development in the oil sector could support financial development, and in particular contribute to greater depth and efficiency of the stock market. There are some important implications in this research for policymakers to promote financial development in OPEC countries.

Suggested Citation

  • Maryam Barzegar Marvasti & Somayeh Razzaghi, 2020. "Investigating the Determinants of Financial Development in OPEC Countries: An Application of Bayesian Model Averaging Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 10(1), pages 342-352.
    • Handle: RePEc:eco:journ2:2020-01-46
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    More about this item

    Keywords

    Financial development; Oil; OPEC; Bayesian model averaging;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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