Financial Development and Growth in the Caucasus and Central Asia

IMF Working Papers, July 8, 2022

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Canonical URL: Financial Development and Growth in the Caucasus and Central Asia

Presents stylized facts on financial development in the CCA countries relative to their EM and LIC peers.
Draws on IMF’s multidimensional index of financial development.
Uses standard growth regressions to assess how financial development can boost growth in the CCA.

CCA countries have made progress following the independence in early 1990s.
Progress was uneven across the CCA, resulting in a divergence of financial development over time and mixed performance relative to EM and LIC peers.
Financial institutions have progressed the most.
Financial markets remain underdeveloped in most CCA countries except Kazakhstan.
Sub-indicator outcomes:
- Financial access has expanded markedly.
- Depth of financial intermediation has remained largely shallow.
- Efficiency of financial intermediation has fluctuated over time.

Standard growth regressions suggest that CCA countries with relatively lower levels of financial development have scope to boost annual growth rates between 0.5-2.5 percent by reaching the level of financial development of frontier CCA countries.

Source: Financial Development and Growth in the Caucasus and Central Asia (IMF Working Paper by Tigran Poghosyan, July 8, 2022).