Determinants of Financial Development: The Case of Mauritius
34 Pages Posted: 13 Dec 2010 Last revised: 28 Apr 2011
Date Written: December 12, 2010
An overwhelming amount of research has shown that financial development fosters economic growth and thus this paper aims to identify the major determinants of financial development. This study investigates the determinants of financial development using a time series analysis for the period 1970-2008 for Mauritius, by means of the ARDL approach and using two different proxies for financial development. The results show that trade openness and financial liberalisation are important determinants of financial development. In addition, investment rate, per capita and literacy rates are also deemed to be important factors in stimulating financial development while inflation adversely influence financial development both in the short and long run. The research findings were supplemented by a questionnaire survey and the results validate the above and further reveal that the level of institutional quality is very important as well. It also shows that cultural or religious forces play an insignificant role in determining financial development in a multi-cultural and relatively educated society like Mauritius.
Keywords: Financial Development, Economic Growth, ARDL, Mauritius, Survey
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