The Determinants of Financial Development in the Republic of Yemen: Evidence from the Principal Components Approach
DOI:
https://doi.org/10.66674/tqrj7458Abstract
This paper provides new evidence that sheds light on the main determinants of financial development in the Republic of Yemen. The result demonstrates that economic growth, natural resource dependence, trade openness and inflation are the main determinants of financial development in Yemen. While economic growth and trade openness have a positive impact on the pace of financial development, the natural resource dependence has a negative impact. However, the effect of inflation is sensitive to the choice of proxy for financial development. Hence, whether a factor is good or bad for financial development depends on the indicator used as a proxy for financial development. Moreover, constructing a new proxy by Principal Components Analysis that summarizes the most information of all the available proxies is an efficient way to reflect the characteristics of financial development.
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Copyright (c) 2017 Ramez Abubakr Badeeb, Hooi Hooi Lean (Author)
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Authors retain copyright and grant Capital Markets Review the right of first publication. Articles are published under the Creative Commons Attribution 4.0 International (CC BY 4.0) licence: https://creativecommons.org/licenses/by/4.0/. This licence permits sharing and adaptation for any purpose, including commercial use, provided appropriate credit is given, a link to the licence is supplied and any changes are indicated. Third-party material excluded from the article's licence must be clearly identified, and authors are responsible for obtaining any required permission.
