Financial Globalization and Economic Growth in South Asia

Abstract

The article examines relationship between financial globalization and economic growth in South Asian countries namely Bhutan, Bangladesh, India, Maldives, Nepal, Pakistan and Sri Lanka. Following the framework of Bekaert et al. (2005) and with the help of Panel VAR and Panel causality (in GMM framework) models the study concludes that the causation from financial globalization to growth in the region appears to be weak. There appears reverse causation running from growth to financial globalization. We found that domestic macroeconomic policies such as fiscal prudence act as pull factors for foreign capital. The article has some interesting results at individual country level. JEL: C33, F21, F36, F65

Impact of globalization and governance determinants on economic growth: An empirical analysis of Asian economies

“…In previous studies, Dreher (2006), Barry (2010), Polasek andSellner (2011), andZahonogo (2018) observed that Sub-Saharan countries were less influenced by globalization and heavily affected by state fragility factors, which contrasts with the results of this study. However, Kilic (2015), Maqbool-ur-Rahman (2015), and Hasan (2019) found that developing countries in South Asian countries are influenced by globalization integration over time and that their economic growth accelerated as the government of these countries adopted appropriate measures to adapt its essence effectively (Gozgor, 2015).…”

“…A generalized estimation modeling, two‐step system, generalized moments (GMM) was also applied along with these techniques. The previous studies of Dreher (2006), Zhang (2007), Kilic (2015), Bhanumurthy and Kumawat (2018) applied the OLS and fixed effect estimation in the analysis of globalization and economic growth, but in a small cross‐section analysis, while Hayat (2019), Paterson et al. (2019), Bahoo et al (2020), Contractor et al.…”

“…By considering the previous studies and the research gap, this study applied the two step‐system GMM estimation to examine globalization indices and governance indicators on economic growth (GDP growth) in panel data of Asian economies. Except for Bhanumurthy and Kumawat (2018), no other studies have used the two‐step system GMM framework for panel analysis of globalization and economic growth. However, a different analysis technique has been used in this study.…”

“…This proposed study used the KOF Globalization Index, which comprises sub-indices (economic, social, and political) and economic growth causation. The studies have studied the Globalization Index and its impacts on economic growth in European, African, and a small sample of South Asian countries in the different periods up to 2014 databases (Barry, 2010;Dreher, 2006;Hasan, 2019;Kilic, 2015;Moghaddam & Redzuan, 2012;Maqbool-ur-Rahman, 2015;Polasek & Sellner, 2011).…”

“…Most of the studies on the impacts of globalization on economic growth have concerned European, American, developed countries or high-income countries (Barry, 2010;Dreher, 2006;Hasan, 2019;Kilic, 2015;Maqbool-ur-Rahman, 2015;Moghaddam & Redzuan, 2012;Polasek & Sellner, 2011). These developed regions have been considered the most globalized according to different ratings or indices institutes.…”