Financial development and poverty reduction / Nur Nabilah Mohd Zaini

Abstract

Financial development and poverty reduction is a continuous topic that will be discuss from past two decades until now. Recent studies were showed that financial development able to reduce the poverty. Unfortunately, it depends on the indicator that will use as represent the financial development. The aim of this study is to investigate the relationship between financial development and poverty reduction in Malaysia. This study will look whether financial development will affect the poverty reduction and vice versa. The dependent variable in this study is poverty reduction that will measure by life expectancy. Then, for the independent variable that represents financial development are stock market valuation, private credit, trade openness and foreign direct investment (FDI). This paper implement by using a time series data which is from 2004 to 2016. The methodology use is multiple regression models represented by ordinary least square (OLS). The result indicates that financial development alleviates poverty by trade openness which one of benefit is offering a job. It can reduce the unemployment rate and the main point, is able to reduce the poverty rate. While other variables show a negative significant effect towards poverty reduction. From this research, it will help our countries and the world institution like United Nation (UN) hope targeting to alleviate poverty and also can be the role model to other Asian countries