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What determines financial development?

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  • Yongfu Huang

Abstract

This paper studies the fundamental determinants of cross-country differences in financial development. Two prominent tools for addressing model uncertainty, Bayesian Model Averaging and Automatic Model Selection using PcGets, are jointly applied to investigate the financial development effects of a wide range of variables taken from various sources. The analysis suggests that the level of financial development in a country is determined by its institutional quality, macroeconomic policies, and geographic characteristics, as well as the level of income and cultural characteristics.

Suggested Citation

  • Yongfu Huang, 2005. "What determines financial development?," Bristol Economics Discussion Papers 05/580, School of Economics, University of Bristol, UK.
    • Handle: RePEc:bri:uobdis:05/580
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    More about this item

    Keywords

    Financial development; Model uncertainty; Bayesian Model Averaging; PcGets;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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