What drives financial development? A Meta-regression analysis

Abstract

This article offers a meta-regression analysis of the literature on the drivers of financial development (FD). Our results based on 1,900 estimates suggest that institutional quality is positively correlated to both private sector credit and stock market capitalization (both as share of Gross Domestic Product). Domestic financial openness has a positive effect on both proxies for FD, while trade openness seems only important for stock market capitalization. Inflation has an adverse effect on FD, which is larger for stock market capitalization. Finally, we conclude that the literature has not yet robustly established that remittances matter for FD.