[Financial System Development and Economic Growth in Least Developed Countries]

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ACKNOWLEDGEMENTS

My thanks go out to all who have helped me complete this study and with whom this project may have not been possible. In particular, my gratitude goes out to friends, facilitator and family for extensive and helpful comments on early drafts. I am also deeply indebted to the authors who have shared my interest and preceded me. Their works provided me with a host of information to learn from and build upon, also served as examples to emulate.

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DECLARATION

I, (Your name), would like to declare that all contents included in this thesis/dissertation stand for my individual work without any aid, & this thesis/dissertation has not been submitted for any examination at academic as well as professional level previously. It is also representing my very own views & not essentially which are associated with university.

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ABSTRACT

The economies of the developing countries of Africa and Asia have for long been lagging behind those of the rest of the world. Several reasons could be cited for these problems but most prominent among them could be poor state of necessary structures and executive capacities. Recent volatility in the global financial markets appeared to have made the problems worse for these countries. It would require an overall re-evaluation of the financial and economic superstructures of the African and Asian countries in order to make them more viable participants in the emerging global economy In this context, an important question is whether a well-developed financial sector as reflected by an expansion of the banking and insurance industries as well as the stock market would enhance economic growth. The research presented here investigates this question specifically in Asia and Africa. In addition, the study examines whether markets have the capacity to manage information asymmetry and stability and can promote technological progress which tends to support an economy's overall long run growth. Specifically, the impact of financial development on economic growth in seventeen developing countries in Africa and Asia is investigated. The financial structures of these countries, including the stock market, as well as the banking and insurance industries are examined, utilizing panel data methods, including SUR generalized least squares (GLS) method, generalized method of moments (GMM) as well as Time-Series Co-integration and Unit Root tests for robustness. The study reveals that there is a bi-directional causality between financial development and economic growth. It also reveals that the insurance industry contributes to economic growth to the same degree as the banking and stock market sectors do. In addition, the study finds that Asian countries generally have more developed financial superstructures than African countries and that these financial superstructures in Asian economies, as represented by the banking, stock market, and insurance sectors, contributed more to economic growth than in African countries, resulting in a comparatively higher growth potential of Asian countries. The study concludes that, in order to reduce business risk, developing countries should expand the insurance sector and ensure adequate financial market oversight to promote financial market efficiency ...