Occasional CEE Seminar: Ünal Seven
Occasional CEE Seminar
An extensive literature has shown that financial development boosts the subsequent economic growth. However, economists have long debated whether financial development contributes to less poverty and inequality. By employing principal component analysis to construct index measures for stock market development and banking development, this paper specifically investigates the impact of stock market/bank development on income inequality/poverty based on a panel data set comprised of emerging countries. We refine the relationship between financial development and inequality/poverty from the perspective of emerging countries. Mixed explanatory empirical findings on panel studies suggest that financial development may not necessarily help the poor in emerging economies. Moreover, the results suggest that it would be better to consider both the separate and simultaneous impacts of banks and stock markets while examining the role of banks and stock markets in inequality/poverty. These results imply important policy implications.