Abstract
Asia has constantly been in the spotlight regarding economic development as it has been the fastest-growing global region over recent decades. This study investigated the effect of financial development on economic growth in selected Asian countries at various stages of economic development. A recently introduced approach, the Dynamic Common Correlated Effects (DCCE) method, was applied to 12 Asian countries/areas covering 26 years (1995–2020). The 12 countries/areas were divided into three groups based on their current economic development status: underdeveloped, moderately, and highly developed. The study results indicated that the effect of financial development on economic growth varied for countries at different economic levels. The association between financial development and economic growth was strongly negative for underdeveloped countries. However, a positive relationship existed between the sampled moderately and highly developed countries/areas. This situation implied that financial development should not be considered a viable way to boost economic growth for countries with underdeveloped economies. Instead, countries with a higher economic status should priorities financial development to promote economic prosperity effectively.
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Data availability
The data supporting this study's findings are available from IMF and The World Bank.
Notes
GDP per capita 2021 (Current US$): Bangladesh:$2457.9; Pakistan:$1505; Vietnam:$3756.5; Indonesia: $4332.7; China:$12,556.3; Malaysia:$11,109.3; Turkey:$9661.2; Thailand:$7066.2; Hong Kong (China): $49,800.5; Singapore: $72,794; Japan:$39,312.7; Korea:$34,997.8.
Source: The World Bank.
The ratio of the number of labourers means the ‘Labour force aged from 15–64 participation rate’.
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Yujue Wang, the first writer, was responsible for the main writing and completed the data collection and regression process of the paper, Nur Syazwaini Mazlan, the second writer, was responsible for the selection of the topic of the whole paper, the guidance of the research methodology and the structure of the paper, Wan Azman Saini Wan Ngah, the third writer, was responsible for the selection of theoretical models in the text and the analysis of the theoretical models, Muhammad Faheem, the fourth writer, was responsible for the analysis of the operation of the research methodology and the guidance of the research methodology, and Yifan Liang, the fifth writer, was participate in the paper's data collection and regression. All authors commented on previous versions of the manuscript, read and approved the final manuscript.
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Wang, Y., Mazlan, N.S., Ngah, W.A.S.W. et al. Financial development and economic growth in Asian countries: evidence from the DCCE approach. Eurasian Econ Rev (2024). https://doi.org/10.1007/s40822-024-00262-2
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DOI: https://doi.org/10.1007/s40822-024-00262-2