Does financial development promote long-term economic growth? evidence from six southeast Asian countries
International Journal of Development Research
Does financial development promote long-term economic growth? evidence from six southeast Asian countries
Received 05th January, 2017; Received in revised form 29th February, 2017; Accepted 24th March, 2017; Published online 30th April, 2017
Copyright©2017, Le Long Hau. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
This study investigates the relationship between financial development and economic growth for 6 ASEAN countries including Thailand, Singapore, Philippines, Malaysia, Indonesia and Vietnam over 1988 - 2012. Using three indicators to measure the financial development level and controlling for appropriate macroeconomic factors, we find that both stock market capitalization and deposit and lending rates margin have a positive effect (but only statistically significant for stock market capitalization) on the economic growth, while the credit to private sector has a significantly negative impact on the economic growth. These findings are robust after controlling for the financial and economic crises in 1997 and 2008. We attribute the negative effect of credit to private sector on economic growth to the low efficiency of the banking system in the Southeast Asian countries.
