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The main aim of this study is to analyse the impact of institutional factors on financial development in Islamic Cooperation Organization Countries. The ratio of domestic credit given to the private sector to GDP is used as a proxy for financial development; income level, broad money, foreign direct investment, trade openness, saving rate, inflation, unemployment rate, exchange rate, final government expenditure, and external debt are utilized as determinants of financial development; corruption index and four sub-levels of economic freedom is used as a proxy for the institutional quality level. According to the linear dynamic panel data estimation by using 1995-2018 panel data, it has been found that the reduction of corruption, the rule of law, regulations effectiveness, and open markets positively affected financial development; however, government size negatively influenced financial development. |
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