Abstract:

This research sheds some light on the impact of the dynamics of retail segments of the financial sector, taking into account the influence of fundamental factors (macroeconomic, institutional, demographic and other financial indicators), on the development path of other financial markets (which are not directly related to households). Analysis of the dynamics of the development of retail financial segments is important for assessing its potential contribution to the overall development of the financial sector and, as a consequence, to the economic growth. This is due to the fact that households have a crucial role in financial markets since they are, first of all, the main suppliers of resources for the economy, and, moreover, the root of changes in structure of financial sector. It was confirmed that households play the role of a net creditor of both the financial system and the economy based on the analysis of data on the financial accounts of the System of National Accounts for a sample of 31 countries (advanced and emerging economies). Moreover, a change in the volume of net lending by households is a significant factor for the dynamics of the volume of net lending/borrowing for the remaining sectors – government and non-financial corporations. To fill the gap in empirical literature, which concerns financial development, I assess the contribution of the dynamics of retail segments to the development of financial sector, considering not only household credit market, but also include other segments such as household deposit market, life insurance market and private pension funds. Besides, I analyze the impact of the dynamics of retail segments in the long, rather than in the medium, term, which allows to revise the role of retail segments in the financial sector extension.