Subject The article deals with the international financial comparisons methodology. Within the framework of the study, we address the potential of non-parametric models to assess financial development assessment. Nonparametric models are by the International Monetary Fund and the World Economic Forum, however, they require further development in view of current challenges. Objectives The research aims to assess the potential of nonparametric models in the international financial comparisons methodology. Methods The research methodology appeals to the theory of financial systems, including the assumption of the phenomenon of financial exuberance. Given this assumption, the Financial Development Index that is developed using a nonparametric approach, has been tested on emerging economies. Results The main research result is our model of the Financial Development Index. The novelty of the model is that the assessment takes into account the national innovation potential, which is becoming an increasingly important factor in financial development. Applying the proposed Index, we managed to rank the investigated countries by the level of financial development and identify their strengths and weaknesses. Conclusions The potential of nonparametric models in the international financial comparisons methodology should be considered as high enough. These models are easy to use and enable to consider the specifics of analyzed information. Decomposition of the Financial Development Index by country reveals special aspects of financial systems, which should be taken into account by their participants and regulators of the financial sector.
Keywords: financial system, financial market, financial development, financial development index
Sokolov B.I., Ivanov V.V. Banki i fondy kapitalov [Banks and capital funds]. St. Petersburg, ROST Publ., 2011, 236 p.
Popov A. Evidence on Finance and Economic Growth. Working Paper Series of European Central Bank, 2017, no. 2115, 77 p. URL: Link
Čihák M., Demirgüç-Kunt A., Feyen E., Levine R. Benchmarking Financial Systems around the World. The World Bank Policy Research Working Paper, 2012, no. 6175, 56 p. URL: Link
Arcand J.L., Berkes E., Panizza U. Too Much Finance? Journal of Economic Growth, 2015, vol. 20, iss. 2, pp. 105–148.
Rioja F., Valev N. Does One Size Fit All? A Reexamination of the Finance and Growth Relationship. Journal of Development Economics, 2004, vol. 74, iss. 2, pp. 429–447. URL: Link
Sahay R., Čihák M., N'Diaye P. et al. Rethinking Financial Deepening: Stability and Growth in Emerging Markets. IMF Staff Discussion Note, 2015, May, no. 15/08, 41 p. URL: Link
Svirydzenka K. Introducing a New Broad-Based Index of Financial Development. IMF Working Paper, 2016, no. WP/16/5, 43 p. URL: Link
Trunin P.V., Kamenskikh P.V. Monitoring finansovoi stabil'nosti v razvivayushchikhsya ekonomikakh (na primere Rossii) [Monitoring the financial stability in developing economies (the Russia case)]. Moscow, IEPP Publ., 2007, 106 p.
Oet M.V., Bianco T., Gramlich D., Ong S. Financial Stress Index: A Lens for Supervising the Financial System. Federal Reserve Bank of Cleveland Working Paper, 2012, no. 12-37, 54 p.
Lukasevich I.Ya., L'vova N.A. [Methods to develop the financial stability index]. Finansy = Finance, 2018, no. 2, pp. 50–54. (In Russ.)
Reuttner I., Glass T. The Financial Development Index 2012: Stalled Recovery – In Search of Growth. World Economic Forum Financial Development Report, 2012, pp. 3–38.
Voronova N.S., L'vova N.A., Pokrovskaya N.V. [Determinants of financial development in the context of Eurasian integration]. Problemy sovremennoi ekonomiki = Problems of Modern Economics, 2018, no. 1, pp. 6–11. (In Russ.)
Rubtsov B.B., Annenskaya N.E. [The influence of information technologies on the quality of modern financial market]. Bankovskie uslugi = Banking Services, 2017, no. 12, pp. 14–23. (In Russ.)
Hsu P.-H., Tian X., Xu Y. Financial Development and Innovation: Cross-Country Evidence. Journal of Financial Economics, 2014, vol. 112, iss. 1, pp. 116–135.
El Ouakdi J., Guermazi D., Alimi K. Innovation, Banking Development and Governance. In: Bach Tobji M., Jallouli R., Koubaa Y., Nijholt A. (Eds) Digital Economy. Emerging Technologies and Business Innovation. Lecture Notes in Business Information Processing. Springer, Cham, 2018, vol. 325. URL: Link
Laeven L., Levine R., Michalopoulos S. Financial Innovation and Endogenous Growth. Journal of Financial Intermediation, 2015, vol. 24, iss. 1, pp. 1–24. URL: Link
Beck T., Chen T., Lin C., Song F. Financial Innovation: The Bright and the Dark Sides. Journal of Banking & Finance, 2016, iss. 72, pp. 28–51. URL: Link
Danilov Yu. [Reforming the financial markets: Success factors]. Mirovaya ekonomika i mezhdunarodnye otnosheniya = World Economy and International Relations, 2016, no. 10, pp. 52–61. (In Russ.)
Dubinin S.K. [Financialization of economic growth and the Russian national financial system]. Finansy: teoriya i praktika = Finance: Theory and Practice, 2017, vol. 21, no. 4, pp. 6–21. URL: Link (In Russ.)
Abramova M.A., Goncharenko L.I., Dubova S.E. et al. [The financial system of Russia: Current state and development prospects]. Ekonomika. Nalogi. Pravo = Economics. Taxes. Law, 2017, vol. 10, no. 2, pp. 6–21. URL: Link (In Russ.)