Abstract

Employability of Principal Component Analysis on Assessing the Quality of Regional Financial Development

Srishti Agarwal

Volume: 13 Issue: 4 2023

Abstract:

Financial systems across regions vary not just in scale, but in how well they work. Using PCA, we build a QRFD index that combines six dimensions—depth, efficiency, stability, inclusion, digitalization, and green finance—into one score. The workflow is simple to replicate: clean and standardize indicators, check they fit together, compute pillar scores, then combine them. A worked example shows how the index flags trade-offs that single measures miss, and we verify its reliability by comparing it with national benchmarks and testing alternative weighting choices. The result is a balanced, policy-ready dashboard that helps regulators and regional governments pinpoint where to act—lower costs, reduce risk, expand access, accelerate digital rails, or strengthen green finance. While final rankings depend on the underlying data, the framework itself is general, easy to implement, and suited to ongoing monitoring and evaluation.

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