2/2016 Alessandra Cepparulo, Juan Carlos Cuestas and Maurizio Intartaglia. Financial development, institutions and poverty alleviation: an empirical analysis

Working Papers of Eesti Pank 2/2016

The aim of this paper is to analyse empirically whether the level of institutional quality influences how financial development
affects poverty for a sample of developing countries covering the period from 1984 to 2012. Using an interaction term
constructed as a product between financial development and institutional quality we find that the pro-poor impact of financial
development decreases as the quality of institutions rises. Such a differential effect can be ascribed to the capacity of banks to provide functions that mimic those performed by an institutional framework that works well. The results of this paper can be used
for policy management.

JEL Codes: G20, I32, O17

DOI: 10.23656/25045520/22016/0008

Keywords: financial development, institutional quality, poverty alleviation, developing countries

Corresponding authorʼs e-mail address: juan.cuestas [at] eestipank.ee

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The views expressed are those of the author and do not necessarily represent the official views of Eesti Pank or the Eurosystem.