* I would like to thank Masud Al Taj, Nicolas Blancher, Mikhail Bogatyrev, Yehenew Endegnanew, Nikoloz Gigineishvili, Gregorio
Impavido, Giulio Lisi, Maria Soledad Martinez Peria, Jan Strasky, Jeromin Zettelmeyer and CCAMTAC research seminar
participants for helpful comments and suggestions. Liliya Nigmatullina provided excellent production assistance. The usual
disclaimer applies.
© 2022 International Monetary Fund WP/22/134
IMF Working Paper
Middle East and Central Asia Department
Financial Development and Growth in the Caucasus and Central Asia
Prepared by Tigran Poghosyan
Authorized for distribution by Nicolas Blancher
July 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit
comments and to encourage debate. The views expressed in IMF Working Papers are those of the
author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: This paper presents stylized facts on financial development in the CCA countries relative to their
EM and LIC peers and assesses how financial development can boost growth in the CCA. Drawing on IMF’s
multidimensional index of financial develo
pment, we find that CCA countries have made progress following the
independence in early 1990s. However, the 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, while financial markets remain underdevelped in most CCA countries except
Kazakhstan. In terms of sub-indicators of financial development, financial access has expanded markedly,
while the depth of financial intermediation has remained largely shallow and efficiency of financial
intermediation has fluctuated over time. Standard growth regressions suggest that CCA countries with relatively
lower level 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.
RECOMMENDED CITATION: Poghosyan, Tigran. 2022. “Financial Development and Growth in the
Caucasus and Central Asia.” IMF Working Paper 22/134.
JEL Classification Numbers:
Keywords: Caucasus and Central Asia; financial development; output growth
