Does Finance Lead to Economic Growth? An Empirical Assessment of 12 Asian Economies

Abstract

The paper describes tests of hypotheses from economic history concerning the significance of financial development as a determinant of economic growth. By invoking co-integration and causality tests for 12 representative countries that corroborate our analysis, evidence shows that the finance and growth relationship varies across Asian markets. Therefore, this study concludes that policy measures for infrastructure improvements should be taken into account to make financial sectors more vibrant to invigorate economic growth.

Financial depth and economic growth: Empirical evidence from ASEAN+3 countries

“…On the other hand, Borlea et al 2016 2012confirmed a significant 2-way relationship between finance and growth in 27 Asian nations after running CCR, Dynamic OLS and Fully-Modified OLS regressions. Biswas (2008) and Pradhan et al (2013) used PCA for indicator construction and similar sets of related tests for causality findings. They also found a mixed result across countries and did not totally support any unidirectional hypotheses.…”

The Relation between Financial Development, Energy Consumption and Economic Growth: Empirical Evidence for the United States

“…The relation between stock markets and growth may also be influenced by the link between stock markets and financial intermediaries. Biswas (2008) argues that stock markets and banks are clearly substitute sources for corporate finance, and that a firm's borrowing needs decline when the firm issues new equity.…”

Financial development index and economic growth: empirical evidence from India

“…Fase and Abma (2003) and Sachsida (2001) proved bidirectional causality between financial development and economic growth. A number of empirical studies recommended causal association varies (Demetriades and Hussein, 1996;Rousseau and Wachtel, 2000;Arestis et al, 2001;Rioja and Valev, 2004;Biswas, 2008). Mattoo et al (2006) concluded positive effect of financial liberalization on economic growth by using the data of 60 countries.…”