Financial Development,Trade Openness and Economics Growth in CLV Countries (original) (raw)
Related papers
2010
There is a strong debate on the subject of whether financial development led economic growth. The studies that investigated the role of financial development on economic growth consider to different proxies for the variable of financial development and various scopes. Recently, availability of new data set causes an interest subject to study the role of financial development in selected Central Asian countries. Accordingly, this study investigates the relationship among financial development, trade openness and economic growth for seven developing countries in the Central Asian countries over 1993- 2008. Using panel data methods we find a positive and significant bilateral relationship between financial development and economic growth, however the relationship between trade openness and growth does not consist with related theories.
Economic Journal of Emerging …, 2009
The main objective of this paper is to evaluate the relative impact of financial sector development, government size and trade openness of a country on its economic growth. This is done to investigate which factors play more prominent role in leading the growth of the economy. Four ASEAN countries known for their similar economic orientation, namely Malaysia, Thailand, Indonesia and Singapore have been selected for this purpose. To achieve the objective, a series of econometric tests is applied. These include unit root test and cointegration test. A vector error correction model (VECM) is then applied to capture both the short-run dynamic and the long-run equilibrium relationship between variables. Impulse response function is utilized to look at the impact of each variable on economic growth while variance decomposition is used to measure the magnitude of the impact. The results show that trade openness plays the leading role in promoting economic growth in Malaysia, Singapore and Indonesia. For Malaysia financial sector development follows second and the government size comes third while for Singapore the order is reverse. For Indonesia, the government size overtakes the leading role at the later stage while the financial sector development is immaterial. For Thailand, no firm conclusion can be made, as the results are not promising. The results signify that the right policies have been taken by the selected countries to promote higher economic growth.
Financial development, trade openness and economic growth
This paper examines whether financial development and openness to international trade can play any positive role in reducing poverty in Bangladesh through their growth enhancing effect. The paper takes granted that growth reduce poverty and makes econometric test to ascertain whether financial development and trade openness cause growth. Standard Granger-causality test is employed for this purpose. Variables are found first difference stationary without having any co-integrating relationship as reported by Johansen co-integration test. As such Granger-causality test is carried out in first difference VAR. The paper does not find any causal relationship between trade openness and growth, and financial development and growth. This implies that financial development and trade openness do not reduce poverty through their effect on growth. However, bi-directional causal link evidenced between financial development and trade openness indicates that these two can contribute to poverty reduction directly through their mutual effect on each other.
Nexus between Financial Development, Trade Openness, and Economic Growth: the Case of Malaysia
2019
This study aims to examine the long-run equilibrium and short-run relationships between fi nancial development, trade openness, and economic growth in Malaysia by using a sample for the period 1982-2014. The ARDL bounds test for cointegration approach and Granger causality test were applied to investigate the relationship. In order to test the stationarity of the series, ADF and PP tests were applied, and both of them revealed that all the series are stationary at fi rst diff erences. The ARDL confi rmed a long-run and short-run relationship between variables. Finally, Granger causality test revealed that there is no evidence that supports fi nance-led growth hypothesis, however, it revealed that fi nancial development indirectly eff ect on growth process through trade openness channel.
2015
The study investigate the relationship between the financial development, trade openness and economic growth in the Saudi Arabian economy from 1971 to 2012.The paper employed unit root tests, the co-integration test, the Granger Causality Test and the Vector Error Correction Model (VECM). The results from Johansen and Juselius co integration test underpins for the existence of long run relationship among the purported variables.Granger causality test exhibits unidirectional causality running from the trade openness to the economic growth in Saudi Arabia. The economic growth also causes financial development. The results manifest that combined causality exists among the variables. The study advocates for the acceleration of financial development in tandem with enhancing the ambit of trade openness for stimulating the economic growth in the country. JEL classification numbers: F43, 016, C32
Financial development, openness in financial services trade and economic growth
International Trade, Politics and Development
Purpose The purpose of this paper is to examine the relationship between financial development, openness in financial services trade and economic growth in BRICS countries for the period 1990–2012. Design/methodology/approach An index for financial development has been constructed using principal component analysis technique by including banking sector development, stock market development, bond market development and insurance sector development. For the robustness of the result, the long-run cointegrating relationship amongst the variables has been analyzed. Findings Overall financial development has a positive and significant impact on economic growth. To take the full advantage of openness in financial services trade, countries need to put more emphasis on the development of their stock markets, bond markets and the insurance sector. The result shows that openness in financial services trade has a positive impact on economic growth when the stock market, bond market and insuranc...
Relationships between Financial Development, Trade Openness, and Economic Growth
Regional Economic Integration and the Global Financial System, 2015
The aim of this chapter is to investigate the cointegration and causal relationship between financial development, trade openness, and economic growth in Turkey for the period of 1980-2012. To analyze the data, the bounds testing and Johansen-Juselius approaches to cointegration and Granger causality test based on vector error-correction model are employed. The cointegration tests suggest that there is a long-run relationship between the variables. The Granger causality test reveals long-run bidirectional causality between trade openness and economic growth. The findings also indicate unidirectional causality running from financial development to trade openness and economic growth in the long run as well as a bi-directional causality between financial development and economic growth in the short run. The results support supply-leading and trade-led growth hypotheses. Therefore, it can be suggested that Turkey can accelerate its economic growth by improving its financial systems and ...
The Linkage between Economic Growth and Openness: Does Financial Development Matter
Journal of Business Research - Turk, 2019
Even though, the impact of trade openness on economic growth overwhelmingly has been analyzed by researchers; the real effect still remains inconclusive and controversial in the literature. The main objective of this study is therefore to find out whether the financial development has any role in determining the impact of trade openness on economic growth Method: The study has employed dynamic panel data of 41 developing countries for the period 1995-2014. Findings: this study could not find any effect of trade openness or financial development on economic growth. Rather, the study has found that interaction term representing the joint effect of financial development and openness has a negative effect on economic growth. Furthermore, the study has empirically proved that human capital and investments have positive effects on economic growth while inflation rate and global financial crisis worsen the economic growth. Discussion: The study has attributed this result to the willingness of investors to transfer their financial capital outflows as trade barriers lowers and financial system gets deeper.
Financial Openness, Trade Integration And Economic Growth: The Case Of Pacific Melanesian Countries
The Journal of Developing Areas, 2018
There has been growing debate about the relationship between financial sector development and the economic growth process. This research attempts to explore the impact of financial market changes on the real economies of the Melanesian Spearhead Group (MSG) countries over the period 1970 to 2015. Financial markets in small developing economies tend to be less efficient and only provide narrower range of financial products and services. We employ a random effect model with generalto-specific sequential modelling procedure to reexamine FD-growth nexus. In line with financial intermediation theories, our results show that a well-functioning financial system is critical and has a significant effect on economic performance through enhancing the intermediation efficiency. A long-run equilibrium relationship between trade openness and economic growth is revealed; suggesting that trade liberalization programs in these countries may have direct positive effect on income growth. Policy-wise, we believe policy makers and government leaders, in partnership with development organizations, should work together to provide the enabling framework to facilitate the growth of an innovative financial system that will promote long-term financial sector deepening in these countries. This may include: mechanisms (such as credit reporting frameworks) to grow the banking and non-banking sectors; improving financial infrastructure and integration; enhancing skills and conditions in the informal sector; and enabling local condition for a better technological diffusion. This will all create a favourable environment for investment and trade which will in turn strengthen long-term economic prospects and outlook.
Trade and Financial Development
Policy Research Working Papers, 2004
The differences in financial development between advanced and developing countries are pronounced. It has been observed, both theoretically and empirically, that these differences in countries' financial systems are a source of comparative advantage and trade. This paper points out that to the extent a country's financial development is endogenous, it will in turn be influenced by trade. We build a model in which a country's financial development is an equilibrium outcome of the economy's productive structure: in countries with large financially intensive sectors financial systems are more developed. When a wealthy and a poor country open to trade, the financially dependent sectors grow in the wealthy country, and so does the financial system. By contrast, as the financially intensive sectors shrink in the poor country, demand for external finance decreases and the domestic financial system deteriorates. We test our model using data on financial development for a sample of 77 countries. We find that the main predictions of the model are borne out in the data: trade openness is associated with faster financial development in wealthier countries, and with slower financial development in poorer ones. * We are grateful to