We examine how armed conflict effects financial development in a cross-country setting using dynamic panel data analysis in a panel of 66 developing countries for the period 1985–2010. Financial development is measured by M2 as a share of GDP, and credit allocated to private sector by banks as a share of GDP. Our findings suggest that armed conflict has a significant adverse effect on financial development. Simultaneously, the quality of governance is always highly significant and conducive to the financial development. The quality of governance is more salient in determining financial development compared to low- and medium-intensity armed conflict; however, the quality of governance cannot entirely offset the adverse impact of high-intensity armed conflict on financial development.
|Journal||Defence and Peace Economics|
|Early online date||13 Oct 2015|
|Publication status||Published - 2017|
Bibliographical noteArticle in press, full citation details will be updated once available. Due to the publisher's policy, the full text of this item will not be available until 13th April 2017.
- Armed conflict
- Civil war
- Financial development
- Governance quality