Abstract

ABSTRACT:

Existent empirical literature illustrates that the effect of finance on productivity is a preposition too obvious to debate. In this study, I extend this preposition by examining for the first time how financial sector transparency led by the private (PrSLT) and public (PuSLT) sector influence national productivity across different contextual and continental setups. The study employs a two-step dynamic panel data of about 138 economies between 2004 and 2017. In modelling national productivity, I employed private and public sector-led financial transparencies as my variables of interest while using gross capital formation growth, human development index, gross savings, foreign direct investment, inflation, trade openness, population growth and domestic credit to private sector as our control variables. The national productivity model is implement in different contextual and continental setups such as economies with strong and weak institutional quality, economies with high and low central bank independence, developed and less developed economies, Africa, Asia, Europe, North and South America. In the full sample, the results suggest that both PrSLT and PuSLT promotes national productivity. This suggests that regardless of the whether private or public sector leads the implementation of transparency in the financial market, it enhances national productivity. However, within sub-samples, PrSLT is found to promote national productivity in low central bank independent and less developed economies while PuSLT promoted national productivity in strong institutional quality, high central bank independence economies as well as African and Asian economies. Interestingly, the results failed to find any significance difference in the effectiveness of PrSLT and PuSLT. Nevertheless, PuSLT is reported to be more consistent and persistent in promoting national productivity across many contextual and continental setups. These findings may imply that policymakers can rely on financial sector transparency to enhance national productivity per head. Again, economies must choose carefully between private and public sector-led financial transparencies since these transparencies may be more or less effective given the context and continent in which they exist. Similarly, improving the quality of institutional quality and central bank independence is also crucial in promoting the relationship between financial sector transparency and national productivity.

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