What, why and how financial development matters: Evidence of ASEAN-5, Asia-5 and OECD-7 economies

• Main Author: TAN, Swee Liang
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2022
• Subjects: Financial development; Banking system; Capital markets; Economic growth; Asian Studies; Finance; Finance and Financial Management; International Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2615; https://ink.library.smu.edu.sg/context/soe_research/article/3614/viewcontent/1._What__Why_and_How_Financial_Development_Matters.pdf
• Institution: Singapore Management University

This paper analyzed the association between bank and capital markets financial development with income per capita in three regions; ASEAN-5 economies (Singapore, Malaysia, Thailand, Philippines, Indonesia), Asia-5 (Japan, China, Hong Kong SAR, South Korea, and India), and OECD-7 (Australia, Canada, Denmark, Norway, Sweden, UK, and US) from 2000 to 2017 using panel data regressions. A key lesson ASEAN-5 can learn from Asia-5 and OECD-7 experience is that bank size does matter despite digital disruptions to their banking system; yet large financial structure that favors banks is negatively associated with Asia-5, and importantly, efficient banking system (not bank size alone) is positively associated with OECD-7 income per capita. The finding has practical policy implications for ASEAN-5’s financial sector liberalization programs that impact the depth, breadth, and efficiency of banks and capital markets.