Macroeconomic Drivers of Financial Development: Evidence From Banking Depth and Credit Access

ABSTRACT What if the key to unlocking a country's financial development lies not only within its financial system but in its broader macroeconomic landscape? Can factors like trade, inflation and remittances shape the path to long‐term financial growth? This study delves into these questions, analysing a robust 48‐year dataset to uncover how macroeconomic variables interact with financial development. The findings highlight that although global trade is crucial for fostering financial development, challenges like inflation and growing remittance inflows can obstruct progress. Interestingly, economic growth—typically viewed as a fundamental driver—does not show a strong correlation with financial development. These insights are especially valuable for developing economies, where managing inflation and optimizing remittance flows remain critical issues.