Bank, Stock Market Efficiency and Economic Growth: Panel Data Evidence from ASEAN-5, Asia-5 and OECD-7 Countries

• Main Author: TAN, Swee Liang
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2022
• Subjects: financial development; efficiency; economic growth; panel corrected standard error; Finance; Growth and Development; Regional Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2642; https://ink.library.smu.edu.sg/context/soe_research/article/3641/viewcontent/3b._Efficiency_and_Growth__SER_Journal_.pdf
• Institution: Singapore Management University

This paper estimates bank and stock market efficiency associations with real per capita GDP growth by examining panel-data across three different regions using Beck-Katz Panel-Corrected Standard Errors (PCSE) regression. It allows heteroskedastic and/or contemporaneously correlated disturbances across panels, with to specify a common first-order autocorrelation within the panel. The results suggest efficiency effects on growth is not unambiguous. The results suggest a threshold beyond which increase in bank overhead cost hurts economic growth, for developing countries. Likewise, there is a threshold beyond which increase in stock market turnover ratio hurts economic growth, for developed countries. One policy implication of the findings is that bank leaders and policy makers should take precautionary measures on overhead costs and stock market liberalisation policies so that savings are efficiently allocated through the financial system between financial and real sectors.