TY - JOUR
T1 - Does financial integration matter for financial development? Evidence from the East Asian and Pacific Region
AU - Taghizadeh-Hesary, Farhad
AU - Phi, Nguyet Thi Minh
AU - Hong, Hanh Hoang Thi
AU - Chu, Vu Tuan
N1 - Funding Information:
Financial development index constructed from the following four financial indicators (using PCA):
Publisher Copyright:
© 2019-Center for Economic Integration, Sejong Institution, Sejong University, All Rights Reserved.
PY - 2019/12
Y1 - 2019/12
N2 - This paper assesses the impact of financial integration on financial development and establishes thresholds for materializing gains of financial advances from financial globalization using a sample of 34 countries from the East Asian and Pacific region. Following the approaches of Kose et al. (2011) and Asongu and De Moor (2016), we test non-linearity within the financial openness and financial development nexus through semi-parametric ordinary least-squares regression, and then, we develop threshold dynamics models. According to our findings, the effect of financial integration on financial development significantly changes across different financial inflows. When using external debt as a proxy for financial openness, there exists a robust significant inverted U-shaped relationship between financial integration and financial development. The empirical findings also suggest that the financial integration-development nexus is contingent on the level of trade openness, national income, and institutional quality. The results are robust to different measures of financial development and integration, the inclusion of other determinants of financial development, and considerations of endogeneity.
AB - This paper assesses the impact of financial integration on financial development and establishes thresholds for materializing gains of financial advances from financial globalization using a sample of 34 countries from the East Asian and Pacific region. Following the approaches of Kose et al. (2011) and Asongu and De Moor (2016), we test non-linearity within the financial openness and financial development nexus through semi-parametric ordinary least-squares regression, and then, we develop threshold dynamics models. According to our findings, the effect of financial integration on financial development significantly changes across different financial inflows. When using external debt as a proxy for financial openness, there exists a robust significant inverted U-shaped relationship between financial integration and financial development. The empirical findings also suggest that the financial integration-development nexus is contingent on the level of trade openness, national income, and institutional quality. The results are robust to different measures of financial development and integration, the inclusion of other determinants of financial development, and considerations of endogeneity.
KW - East Asian and Pacific region
KW - Financial development
KW - Financial integration
KW - GDP per capita
KW - Trade openness
UR - http://www.scopus.com/inward/record.url?scp=85076059600&partnerID=8YFLogxK
U2 - 10.11130/jei.2019.34.4.591
DO - 10.11130/jei.2019.34.4.591
M3 - Article
AN - SCOPUS:85076059600
SN - 1976-5525
VL - 34
SP - 591
EP - 618
JO - Journal of Economic Integration
JF - Journal of Economic Integration
IS - 4
ER -