Does central banking promote financial development?

This paper examines the influence of central bank characteristics and their monetary policies on the level of financial development. Initially, on the basis of a review of the literature, we selected the central characteristics of the central banks as well as their monetary policies likely to influence the level of financial development. Next, we estimated an econometric model linking the level of financial development with measures of central bank characteristics and their monetary policies using panel data econometrics. The sample is made up of a panel of 89 countries, including 22 developed countries, 34 emerging countries and 33 developing countries over the period 1980–2010. The results show that there is a very significant influence of central bank characteristics as well as their monetary policies on the fluctuation of the level of financial development for the three categories of countries.