• The Journal of Asian Finance, Economics and Business
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• v.7 no.8
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• pp.161-173
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• 2020

This study examines the nonlinear relationship between financial development and economic growth in Pakistan using the threshold regression model for the period 1980-2017. We also employed quantile regression with 0.25, 0.50, and 0.75 quantiles of conditional distribution. The quantile regression is based on minimizing of sum of squared residuals. The result indicates that economic growth responds positively to financial development when the level of financial development surpasses the threshold value of 0.151. However, when financial development lies below the threshold value (that is, 0.151), its impact on economic growth is negative. Thus, when financial development of Pakistan surpasses the threshold level, it contributes more towards economic growth since greater level of financial development contributes more to boosts economic growth. This finding reveals that economic growth reacts differently to financial development, and the relationship between financial development and economic growth is U-shaped in Pakistan. Among the other variables, physical capital, labor force, and government expenditure exert a positive effect on economic growth. Furthermore, inflation rate and trade openness have an insignificant impact on economic growth. The results of quantile regression also confirm the non-linear relationship between financial development and economic growth in Pakistan. The finding of this study suggests revamping of financial sector policies in Pakistan.

• East Asian Economic Review
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• v.19 no.2
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• pp.143-166
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• 2015

This paper investigates the empirical evidence on the relationship between financial accessibility and economic growth to test the conventional hypothesis that improved financial accessibility leads to financial development and economic growth. First, we built a dynamic panel model on the relationship between financial accessibility and economic growth with a set of controlled variables. We then used several financial access indicators from 165 countries, collected from 2004 to 2011, applying the generalized method of moments (GMM) estimators to estimate their relationship. From these estimations, we found that high financial accessibility leads to high income in general. In addition, we found that an increase in financial access indicators had a greater impact on economic growth in low-income countries than it did on economic growth in high-income countries.

• KDI Journal of Economic Policy
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• v.42 no.1
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• pp.31-56
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• 2020

Does financial development contribute to economic growth? The literature finds that an expansion in financial resources is useful for economic growth if the degree of financial development is under a certain threshold; otherwise, the expansion is detrimental to growth. Almost every published study, however, considers country-panel data. Accordingly, the results are not directly applicable to the Korean economy. By examining Korean time-series data, this paper finds that there is an inverse U-shaped relationship between the per capita real GDP growth rate and private credit (as a percentage of nominal GDP)-a well-known measure of quantitative financial development, where the threshold is 171.5%. This paper also finds that private credit is positively associated with economic growth if the share of household credit out of private credit is less than 46.9%; otherwise, private credit is negatively associated with economic growth. As of 2016, the ratio of private credit to GDP and the ratio of household credit to private credit are both higher than the corresponding thresholds, which implies that policymakers should place more emphasis on qualitative financial development than on a quantitative expansion of financial resources.

• The Journal of Industrial Distribution & Business
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• v.13 no.5
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• pp.15-26
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• 2022

Purpose: There has been a consistent failure of businesses that are run by a single person. Most of these collapse at infancy prematurely and those that survive continue to operate at minimal capacity. The study thus sought to enhance growth of sole proprietors from being small entities to large corporates. Financial determinants of business growth were earmarked for research as they were amongst the grey areas of business growth research. Research design, data and methodology: The target population of the study was made up of groceries retail sole proprietors operating in Epworth, Zimbabwe. Questionnaires were used in a once-off cross-sectional survey using stratified random sampling. Through a deductive research approach, four financial determinants of business growth were established namely financial availability, financial management, financial evaluation and financial investment (AMEI). These constructs formulated the basis for the development of the model which linked financial factors to business growth. Results: The study found out that all four financial determinants were statistically significant (P < 0.05) in predicting business growth. Conclusions: The study concludes that the model tested was useful in explaining sole proprietor's business growth. Sole proprietors should have access to funding, manage received funds in an appropriate manner, invest into the business and evaluate their business processes.

• The Journal of Asian Finance, Economics and Business
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• v.6 no.1
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• pp.107-119
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• 2019

This paper examines the impact of financial integration on economic growth in Southeast Asia over the period 1993-2013. This paper further investigates whether the relationship depends on the level of financial and economic development, government corruption, and macroeconomic policy. These questions raise important issues both from a theoretical and a policy perspective. We employ the generalized methods of moment (GMM) in the dynamic panel estimation framework to analyse several factors, including initial income, initial schooling, financial development, inflation, trade openness, corruption, and financial crisis. The study further analyzes the data using the EGLS model to examine the consistency of the GMM model. We found that financial integration has a significant positive effect on economic growth in Southeast Asia. Our findings suggest that increasing financial integration could improve the productive capacity of the economy, including more investments and efficient allocation of capital, and thus enhancing economic growth in this region. More specifically, the results suggest that the government should work towards eliminating corruption and stabilizing macroeconomics in order to enhance financial integration and economic growth. This paper sheds new insights on a better evaluation of the past and present theorizing on the subject of financial integration and economic growth; especially, in Southeast Asia.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.11
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• pp.191-201
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• 2021

This article examines the role of financial development in economic growth in a number of transitional economies where the financial systems were newly established or reformed only in the early 1990s to facilitate their transition from centrally planned economies to market-based ones. Based on a dataset collected from 29 transitional economies and 5 Asian developing economies covering the period 1990-2020, an empirical endogenous growth model is specified and estimated using the generalized method of moments (GMM). Three measures of financial development are used to investigate the relative role of the banking system and stock exchange market in the process of transition and growth. The results show that the three measures of financial development are crucial determinants of economic growth in transitional economies but the link seems to be in an inverted U-shape. This suggests the existence of thresholds for different channels of the financial sector to expand to positively influence growth. When becoming too large relative to the size of the economy, the financial system would have become a factor not conducive to growth. The growth convergence hypothesis is also confirmed and the impacts of other growth determinants are overall consistent with the extant literature.

• East Asian Economic Review
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• v.16 no.1
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• pp.97-115
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• 2012

This paper investigates the relationship between financial markets and output growth for a panel of 27 Asian countries over 1960-2009. It utilizes the recently-developed panel cointegration techniques to test and estimate the long-run equilibrium relationship between real GDP and financial development proxies. Real GDP and financial development variables are found to have unit roots and to be cointegrated, based on various panel unit root tests and panel cointegration tests. We find that there is a statistically significant positive bi-directional cointegrating relationship between financial development and output growth by three distinct methods of panel cointegration estimation. Empirical findings suggest that financial market development promotes output growth and in turn output growth stimulates further financial development.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.5
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• pp.21-27
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• 2021

The financial sector is one of the most important building blocks of the economy. When this sector efficiently implemented a well-crafted program on banking and financial system to translate financial activities to income-generating activity, economic growth will be realized. Hence, this study analyzed the effect of financial intermediation on economic growth and the existence of cointegrating relationship using time-series data from 1986 to 2015. The influence of financial intermediation in terms of bank credit to bank deposit ratio, private credit, and stock market capitalization and time trend to economic growth was estimated using ordinary least squares (OLS) multiple regression. The results showed that all the financial intermediation indicators and time trend exert significant effect on Gross Domestic Product (GDP) per capita. The positive sign of the time trend indicates that there is an upward trend in GDP per capita averaging approximately 0.06 percent annually. Furthermore, the cointegration test using the Johansen procedure revealed that there is a presence of long-term equilibrium relationship between financial intermediation and time trend and economic growth, and rules out spurious regression results. This study established the idea that financial intermediation in the Philippines has a significant and vital role in stimulating growth in the economy.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.10
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• pp.73-85
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• 2020

As an effort to achieve sustainable development and increase people's welfare, financial inclusion has become the policy agenda of many countries. Therefore, the effect of financial inclusion on economic growth, poverty, income inequality, and financial stability in several countries in Asia has become the goal and this is the subject of this study. Financial inclusion is measured by 3 dimensions, namely banking penetration, access to banking services, and use of banking services. Poverty ratio below the national poverty line and the Gini coefficient are used as indicators of poverty and income inequality. Financial stability is measured by Bank Z-Score and bank nonperforming loans. The results from the hypothesis test shows that all dimensions of financial stability simultaneously have significant influence on economic growth, poverty, income inequality, and financial stability. On the other hand, the partial impact of financial inclusion dimension on economic growth, poverty alleviation, income inequality, and financial stability in ten countries of Asia has not been optimal. The derived results of this study is required to be interpreted and considered by the Governments of each country in developing strategies for increasing financial inclusion, so that the policy to achieve sustainable development and enhancement of people's welfare can be achieved.

• Journal of Distribution Science
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• v.22 no.3
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• pp.49-58
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• 2024

Purpose: Research on financial development plays a crucial role in guiding and implementing policies for both financial development and economic growth. This study aims to evaluate the impact of financial development on the economic growth of Southeast Asian countries. Research design, data and methodology: The research utilizes data from 11 Southeast Asian countries from 2015 to 2022. Financial development data is proxied by credit distribution in private sector. Results: Based on the analysis using the FGLS model, it indicates that financial development has a positive impact on the economic growth of Southeast Asian countries. In addition, the study also examines the impact of state investment costs and FDI investment on economic growth. The results also show that foreign direct investment flows still play an important role in Southeast Asian countries (FDI has a positive impact on economic growth). State investment costs also impact economic growth, showing that the development of public investment also brings good development to countries. Conclusions: These results suggest that credit policies for financial development in general, and the development of private credit in particular, play a significant role in these countries. Building a system to promote the activities of private sector economies will help stimulate the economic development of Southeast Asian countries.