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Does exchange rate volatility affect financial depth? Evidence from BRICS countries

Oğuzhan Şengül
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Oğuzhan Şengül: İLBANK A.Ş., Turkey

Theoretical and Applied Economics, 2021, vol. XXVIII, issue 1(626), Spring, 247-258

Abstract: Deepening of financial system in emerging market economies is crucial for economic development. Financial depth enhances the ability of financial system to supply funds to private sector. In this study, the impact of exchange rate volatility on financial depth in Brazil, Russia, China and South Africa is investigated in the short and long run. In this regard, annual data belonging to 1980-2018 period is used. The findings obtained from empirical analyses confirm that real exchange rate is not a factor that affects financial depth and so financial development. On the other hand, financial depth is a factor affecting exchange rate volatility in Brazil, Russia, China and South Africa. These results may be a reason of relatively enough size and development of financial systems. Moreover, dominancy of public sector in financial system may be another reason.

Keywords: financial depth; exchange rate volatility; BRICS economies. (search for similar items in EconPapers)
Date: 2021
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Handle: RePEc:agr:journl:v:1(626):y:2021:i:1(626):p:247-258