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Introducing a New Broad-Based Index of Financial Development
Report

Introducing a New Broad-Based Index of Financial Development

IMF, 2016

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Editorial Rating

7

Qualities

  • Innovative

Recommendation

Data drive modern economics, but one of the biggest missing data sets involves aspects of a country’s financial development. Until now, only rough approximations served to explain how finance influences growth and prosperity. Economist Katsiaryna Svirydzenka attempts to fill this gap by introducing a series of indices capturing different measures of financial markets and institutions. getAbstract recommends this thoughtful and groundbreaking addition to the research on financial development and growth to economists and analysts.

Take-Aways

  • Statistics on private credit and stock market capitalization as proxies in determining a country’s level of financial development fail to reflect the full picture.
  • An overall financial development index should examine an economy’s financial institutions and financial markets. Researchers then can drill down into three indicators of each component that gauge “depth, access and efficiency.”
  • In a study of 183 countries from 1980 to 2013, these indices allowed for a more nuanced view of financial development across the world.

About the Author

Katsiaryna Svirydzenka is an economist at the International Monetary Fund.