Work detail

Does Financial Development Alleviate Poverty?

Author: Mgr. Aneta Mohylová
Year: 2017 - summer
Leaders: prof. Roman Horváth Ph.D.
Work type: Finance, Financial Markets and Banking
Language: Czech
Pages: 122
Awards and prizes:
Abstract: The aim of this thesis is to examine the link between financial development and poverty
alleviation. Unlike other studies for poverty-finance nexus, Bayesian Model Averaging is
employed as it is an efficient tool when dealing with high model uncertainty that is common to
these types of regression. Two types of poverty measures are used in the estimation, the relative
one represented by income share held by the lowest 20% and the absolute one represented by
poverty headcount per $1.9 a day. The traditional measures of the depth of the banking sector
and stock markets used in the literature are complemented with the financial indicators that
account for efficiency, stability and access to finance from newly developed Global Financial
Development Database by World Bank. The results suggest that the efficiency and stability of
the banking sector contribute to absolute poverty alleviation. The results are robust to different
model specifications and potential presence of endogeneity between the absolute poverty
measure and financial development. Moreover, it is suggested that financial development
disproportionately helps the rich.


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