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Does foreign bank entry contribute to financial development? Examining the role of income thresholds
Author(s) -
Gopalan Sasidaran
Publication year - 2018
Publication title -
development policy review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.671
H-Index - 61
eISSN - 1467-7679
pISSN - 0950-6764
DOI - 10.1111/dpr.12286
Subject(s) - financial deepening , per capita income , financial sector development , economics , financial system , panel data , per capita , business , monetary economics , international economics , financial sector , finance , financial intermediary , econometrics , population , demography , sociology
This article examines the relationship between foreign bank entry and financial development in a panel framework covering 57 emerging market and developing economies ( EMDE s) 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 EMDE s. 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.