Financial openness and economic growth

In last few decades, financial openness has been widely noted around the world. The process of financial openness such as banking liberalization, trade openness, capital account liberalization has closely brought together the financial market and institutions around the world. The objective of the s...

Full description

Saved in:

Bibliographic Details
Main Author:	Norlida, Johari
Format:	Thesis
Language:	eng eng
Published:	2017
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/7221/1/s821022_01.pdf https://etd.uum.edu.my/7221/2/s821022_02.pdf
Tags:	Add Tag No Tags, Be the first to tag this record!

id	my-uum-etd.7221
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Sabki, Sharmilawati
topic	HG Finance
spellingShingle	HG Finance Norlida, Johari Financial openness and economic growth
description	In last few decades, financial openness has been widely noted around the world. The process of financial openness such as banking liberalization, trade openness, capital account liberalization has closely brought together the financial market and institutions around the world. The objective of the study is to examine the effect of financial openness on economic growth for the five major economies in ASEAN (Thailand, Singapore, Indonesia, Malaysia and Philippines) between 2000 and 2014. The balanced panel data from 2000 to 2014 for these countries has been employed in this study. The variables used are independent variable (financial openness), dependent variable (GDP) and four control variables (inflation, official exchange rate, trade and government expense). Using the Panel OLS, this study discovers a positive relationship between financial openness and economic growth. In addition, the official exchange rate and government expense are also found to influence the economic growth positively. However, the level of trade and inflation do not significantly related to economic development. For the robustness model, the FDI net inflow is employed as the independent variable to measure the financial openness. Although, different measurement of financial openness (FDI net inflows) has been used to replace the KAOPEN index, these three variables (financial openness, official exchange rate and government expense) remain to be the factors that affect the level of economic growth. In addition, supporting the earlier conclusion, inflation and trade are not influencing the economic growth. Thus, the findings provided by this study would assist the policy makers in the five ASEAN countries in assessing and strengthening the strategies on the financial openness for the benefits of the countries.
format	Thesis
qualification_name	other
qualification_level	Master's degree
author	Norlida, Johari
author_facet	Norlida, Johari
author_sort	Norlida, Johari
title	Financial openness and economic growth
title_short	Financial openness and economic growth
title_full	Financial openness and economic growth
title_fullStr	Financial openness and economic growth
title_full_unstemmed	Financial openness and economic growth
title_sort	financial openness and economic growth
granting_institution	Universiti Utara Malaysia
granting_department	School of Economics, Finance & Banking
publishDate	2017
url	https://etd.uum.edu.my/7221/1/s821022_01.pdf https://etd.uum.edu.my/7221/2/s821022_02.pdf
_version_	1747828176074047488
spelling	my-uum-etd.72212021-05-10T08:06:37Z Financial openness and economic growth 2017 Norlida, Johari Sabki, Sharmilawati School of Economics, Finance & Banking School of Economics, Finance and Banking HG Finance In last few decades, financial openness has been widely noted around the world. The process of financial openness such as banking liberalization, trade openness, capital account liberalization has closely brought together the financial market and institutions around the world. The objective of the study is to examine the effect of financial openness on economic growth for the five major economies in ASEAN (Thailand, Singapore, Indonesia, Malaysia and Philippines) between 2000 and 2014. The balanced panel data from 2000 to 2014 for these countries has been employed in this study. The variables used are independent variable (financial openness), dependent variable (GDP) and four control variables (inflation, official exchange rate, trade and government expense). Using the Panel OLS, this study discovers a positive relationship between financial openness and economic growth. In addition, the official exchange rate and government expense are also found to influence the economic growth positively. However, the level of trade and inflation do not significantly related to economic development. For the robustness model, the FDI net inflow is employed as the independent variable to measure the financial openness. Although, different measurement of financial openness (FDI net inflows) has been used to replace the KAOPEN index, these three variables (financial openness, official exchange rate and government expense) remain to be the factors that affect the level of economic growth. In addition, supporting the earlier conclusion, inflation and trade are not influencing the economic growth. Thus, the findings provided by this study would assist the policy makers in the five ASEAN countries in assessing and strengthening the strategies on the financial openness for the benefits of the countries. 2017 Thesis https://etd.uum.edu.my/7221/ https://etd.uum.edu.my/7221/1/s821022_01.pdf text eng public https://etd.uum.edu.my/7221/2/s821022_02.pdf text eng public other masters Universiti Utara Malaysia Adam, A. M. (2011). Financial openness induced growth and poverty reduction. The International Journal of Applied Economics and Finance, 5(1), 75-86. Adekunle, O. A., Oluwaseyi, B., & Olusoji, S. G. (2013). The effect of the financial liberalisation on economic growth. International Journal of Academic Research in Economics and Management Sciences, 2(1), 123. Afzal, M. & Ali, K. (2008), “An historical evaluation of “export-led growth” policy in Pakistan”, Lahore Journal of Policy Studies, 2(1), 69-82. Afzal, M., & Hussain, I. (2010). Export-led growth hypothesis: Evidence from Pakistan. Journal of Quantitative Economics, 8, 130–147. Agénor, P. R. (2001). Benefits and costs of international financial integration: theory and facts. Ahmed, S. (2010) ‘An empirical study on inflation and economic growth in Bangladesh’. OIDA International Journal of Sustainable Development, 2(3), 41-48. Andraz, J. M., & Rodrigues, P. M. (2010). What causes economic growth in Portugal: exports or inward FDI?. Journal of Economic Studies, 37(3), 267-287. Andriesz, E., Asteriou, D., & Pilbeam, K. (2005). The linkage between financial liberalization and economic development: empirical evidence from Poland. Journal of Economic Integration, 383-399. Aghion, P., Bacchetta, P., Ranciere, R., & Rogoff, K. (2009). Exchange rate volatility and productivity growth: The role of financial development. Journal of monetary economics, 56(4), 494-513. Arteta, C., Eichengreen, B., & Wyplosz, C. (2001). When does capital account liberalization help more than it hurts? (No. w8414). National bureau of economic research. Asamoah, G. N. (2011). The impact of the financial sector reforms on savings, investments and growth of gross domestic product (GDP) in Ghana. International Business & Economics Research Journal (IBER), 7(10). Asghar, N., & Hussain, Z. (2014). Financial development, trade openness and economic growth in developing countries: Recent evidence from panel data. Pakistan Economic and Social Review, 52(2), 99. Awojobi, O. (2013). Does trade openness and financial liberalization foster growth: An empirical study of Greek economy. International Journal of Social Economics, 40(6), 537-555. Ayanwale, A. B. (2007). FDI and economic growth: Evidence from Nigeria. African Economics Research Consortium, 165. Azeez, B. A., Kolapo, F. T., & Ajayi, L. B. (2012). Effect of exchange rate volatility on macroeconomic performance in Nigeria. Interdisciplinary journal of contemporary research in business, 4(1), 149-155. Baele, L., Ferrando, A., Hördahl, P., Krylova, E., & Monnet, C. (2004). Measuring European financial integration. Oxford Review of Economic Policy, 20(4), 509-530. Banam, K. C. (2010). Impact of financial liberalization on economic growth in Iran: An Empirical Investigation (Doctoral dissertation, Eastern Mediterranean University (EMU)). Bashar, O. K., & Khan, H. (2007). Liberalization and growth: An econometric study of Bangladesh. Bekaert, G., Harvey, C. R., & Lundblad, C. (2005). Does financial liberalization spur growth?. Journal of Financial economics, 77(1), 3-55. Blanchard, O. and Johnson, D. H. (2013). Macroeconomics, 6th Edition, Pearson press. Boot, A. W., & Thakor, A. V. (2000). Can relationship banking survive competition?. The journal of Finance, 55(2), 679-713. Busse, M., & Königer, J. (2012). Trade and economic growth: A re-examination of the empirical evidence. Bussiere, M., & Fratzscher, M. (2008). Financial openness and growth: short‐run gain, long‐run pain?. Review of International Economics, 16(1), 69-95. Callen, T (2012), ‘Purchasing power parity: weights matter’, IMF. Retrieved from http://www.imf.org/external/pubs/ft/fandd/ basics/ppp.htm as of November 12, 2017. Chang, R., & Velasco, A. (2000). Banks, debt maturity and financial crises. Journal of international Economics, 51(1), 169-194. Chakraborty, D., & Mukherjee, J. (2012). Is there any relationship between foreign direct investment, domestic investment and economic growth in India? A time series analysis. Review of Market Integration, 4(3), 309-337. Chinn, M. D., & Ito, H. (2008). A new measure of financial openness. Journal of comparative policy analysis, 10(3), 309-322. Chude, N. P., & Chude, D. I. (2013). Impact of government expenditure on economic growth in Nigeria. International journal of business and management review, 1(4), 64-71. Claessens, S., Demirgüç-Kunt, A., & Moshirian, F. (2009). Global financial crisis, risk analysis and risk measurement. Cooray, A. (2009). Government expenditure, governance and economic growth. Comparative Economic Studies, 51(3), 401-418. Danladi, J. D., Akomolafe, K. J., Olarinde, O. S., & Anya, N. L. (2015). Government expenditure and its implication for economic growth evidence from Nigeria. Journal of Economics and Sustainable Development, 6(18), 142-150. Demirgüç-Kunt, A., & Detragiache, E. (2000). Monitoring banking sector fragility: a multivariate logit approach. The World Bank Economic Review, 14(2), 287-307. Detragiache, E., Gupta, P. & Tressel, T. 2008. Foreign banks in poor countries: theory and evidence. Journal of Banking and Finance 22(5):565-587. Dollar, D., Kraay, A., 2002. Institutions, trade, and growth. Journal of Monetary Economics, 50 (2003), 133–162. Doyle, E. (2001). Exchange rate volatility and Irish-UK trade, 1979-1992. Applied Economics, 33(2), 249-265. Dreher, A. (2006). Does globalization affect growth? Evidence from a new index of globalization. Applied Economics, 38(10), 1091-1110. Dreher, A., Gaston, N., & Martens, P. (2008). Measuring globalisation: Gauging its consequences. Springer Science & Business Media. Eichengreen, B. (2007). The real exchange rate and economic growth. Social and Economic Studies, 7-20. Faria, A. J., Paula, F., Luiz, P., & Meyer, R. T. (2009). Financial liberalization, economic performance and macroeconomic stability in brazil: an assessment of the recent period. Anais do XXXVII Encontro Nacional de Economia–ANPEC. Foz do Iguaçu. Gamra, S. B. (2009). Does financial liberalization matter for emerging East Asian economies growth? Some new evidence. International Review of Economics & Finance, 18(3), 392-403. Gehringer, A. (2013). Growth, productivity and capital accumulation: The effects of financial liberalization in the case of European integration. International Review of Economics & Finance, 25, 291-309. Gemmell, N., & Kneller, R. (2001). The impact of fiscal policy on long-run growth. European Economy-European Commission Directorate General For Economic and Financial Affairs-Reports and Studies-, (1), 97-130. Georgios, K. (2003). Trade openness and economic growth, can we estimate the precise effects? Applied Econometrics and International Development. Aeeade,3. Greene W.H. (2017) Econometric Analysis, Eight Edition, New York University. Glüzmann, P. A., Levy-Yeyati, E., & Sturzenegger, F. (2012). Exchange rate undervaluation and economic growth: Díaz Alejandro (1965) revisited. Economics Letters, 117(3), 666-672. Gray, M. (2002). Foreign direct investment and recovery in Indonesia: Recent events and their impact. IPA Backgrounder, 14(2). Habib, M. M., Mileva, E., & Stracca, L. (2017). The real exchange rate and economic growth: revisiting the case using external instruments. Journal of International Money and Finance, 73, 386-398. Hassan, Asan Ali Golam. (2004). Growth, Structural Change and Regional Inequity in Malaysia. England: Ashgate Publishing Limited. Hassan, A. K., & Islam, M. R. (2007). Temporal causality and dynamics of financial development, trade openness, and economic growth in Vector Auto Regression (VAR) for Bangladesh, 1974-2003: Implication for poverty reduction. Journal of Nepalese Business Studies, 2(1), 1-12. Hausmann, R.; Pritchett, L.; Rodrik, D. (2005). Growth accelerations. Journal of EconomicGrowth, 10 (4), 303-329. Hartmann, P., Straetmans, S., & De Vries, C. G. (2004). Asset market linkages in crisis periods. The Review of Economics and Statistics, 86(1), 313-326. Hausmann, R., Panizza, U., & Rigobon, R. (2006). The long-run volatility puzzle of the real exchange rate. Journal of International Money and Finance, 25(1), 93-124. Hellman, T., Murdock, K., & Stiglitz, J. E. (2000). Liberalization, moral hazard in banking, and prudential regulation: Are capital requirements enough. Hye, Q. M. A., & Wizarat, S. (2013). Impact of financial liberalization on economic growth: a case study of Pakistan. Asian Economic and Financial Review, 3(2), 270. IMF (2007). Global Financial Stability Report: Financial Market Turbulence Causes, Consequences, and Policies. International Monetary Fund. InceYenilmez, M. (2011). Financial liberalization, financial development and economic growth: An empirical analysis for Turkey . University Library of Munich, Germany. Retrieved from http://mpra.ub.uni-muenchen.de/31978/1/MPRA_ paper_31978.pdf as of November 10, 2017. Iqbal, N., & Nawaz, S. (2009). Investment, inflation and economic growth nexus. The Pakistan Development Review, 863-874. Jakob, B. (2015). Impact of exchange rate regimes on economic growth. Undergraduate Economic Review, 12(1), 11. Julia, M., Jouni, P., & Timo, K. (2015). Capacity of the dispute settlement body of the world trade organization for resolution of disputes related to trade in forest products. Resources and Technology, 12(1). Kabir, S. H., & Hoque, H. A. A. B. (2007). Financial liberalization, financial development and economic growth: evidence from Bangladesh. Savings and Development, 431-448. Kaminsky, G., & Schmukler, S. (2003). Short-run pain, long-run gain: the effects of financial liberalization (No. w9787). National Bureau of Economic Research. Kasman, A., & Kasman, S. (2005). Exchange rate uncertainty in Turkey and its impact on export volume. METU Studies in Development, 32(1), 41. Khazri, B., & Djelassi, M. (2011). The relationship between financial liberalization, FDI and Economic Growth: An Empirical Test for MENA Countries. Economics and Finance Review, 1 (10), 20-26. Koo, J., and Shin, S. (2004) “Financial liberalization and corporate investments: Evidence from Korean Firm Data”, Asian Economic Journal, 18 (3): 277-92. Koman, J and T. Bratimasrene (2007), The relationship between Government Expenditure and Economic Growth in Thailand. Journal of Economic Education, 14: 234-246. Laeven, L. (2000). Does financial liberalization reduce financial constraints? World Bank Policy Research working paper no. 2435. Lane, P. R., & Milesi-Ferretti, G. M. (2007). The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970–2004. Journal of international Economics, 73(2), 223-250. Law, S. H., & Azman-Saini, W. N. W. (2013). Capital account liberalization and economic performance in Malaysia. The Singapore Economic Review, 58(03), 1350022. Liu, T., & Li, K. W. (2001). Impact of liberalization of financial resources in China’s economic growth: evidence from provinces. Journal of Asian Economics, 12(2), 245-262. Makki, S. S., & Somwaru, A. (2004). Impact of foreign direct investment and trade on economic growth: Evidence from developing countries. American Journal of Agricultural Economics, 86(3), 795-801. Marcbowles (2009). Advanced Logistics and Management. Retrieved from http://www. marcbowles.com/courses/adv_dip/index.htm as of November 15, 2017. Miller, J. (2004). The contestability of Markets. Student Economic Review, 18, 211-222. Modebe, N. J., Okafor, R. G., Onwumere, J. U. J., & Ibe, I. G. (2012). Impact of recurrent and capital expenditure on Nigeria’s economic growth. European Journal of Business and Management, 4(19), 66-74. Mody, A., & Murshid, A. P. (2005). Growing up with capital flows. Journal of international economics, 65(1), 249-266. Munir, S., Chaudhry, I. S., & Akhtar, M. H. (2013). Financial liberalization and economic growth in Pakistan: Empirical Evidence from Co-integration Analysis. Pakistan Journal of Social Sciences (PJSS), 33(2). Musila, J. W., & Yiheyis, Z. (2015). The impact of trade openness on growth: The case of Kenya. Journal of Policy Modeling, 37(2), 342-354. McKinnon, R.L (1973). Money and Capital in Economic Development, Washington. Naveed, S., & Mahmood, Z. (2017). Impact of domestic financial liberalization on economic growth in Pakistan. Journal of Economic Policy Reform, 1-19. Nzotta, S. M. (2004). Money, banking and finance: Theory and practice. Owerri: Hudson—Jude Nigeria Publishers. Ogunmuyiwa, M. S., & Ekone, A. F. (2010). Money supply-Economic growth nexus in Nigeria. J Soc Sci, 22(3), 199-204. Olorunfemi, S. (2008). Public investment and economic growth in Nigeria: an autoregressive model. Journal of international Finance and Economics, 5(3). Owoye, O., & Onafowora, O. A. (2007). M2 targeting, money demand, and real GDP growth in Nigeria: do rules apply. Journal of Business and Public affairs, 1(2), 1-20. Özdemir, D., & Erbil, C. (2008). Does financial liberalization trigger long-run economic growth?. In evidence from Turkey and other recent EU members. Berlin, Germany: Eco Mod International Conference on Policy Modelling. Park, H. M. (2003). Multicollinearity in Regression Models. Jeeshim and Kucc,625. Patnaik, I., & Shah, A. (2012). Did the Indian capital controls work as a tool of macroeconomic policy?. IMF Economic Review, 60(3), 439-464. Paudel, R. C., & Perera, N. (2009). How does financial liberalisation impact on money demand and economic growth? Evidence from Sri Lanka. Prasad, E., Rogoff, K., Wei, S., & Kose, M. (2009). Financial globalization: A reappraisal. IMF Staff Papers, 56, 8–62. Quinn, D., Schindler, M., & Toyoda, A. M. (2011). Assessing measures of financial openness and integration. IMF Economic Review, 59(3), 488-522. Ranciere, R., Tornell, A., & Westermann, F. (2006). Decomposing the effects of financial liberalization: Crises vs. growth. Journal of Banking & Finance, 30(12), 3331-3348. Rajan, R. G., & Zingales, L. (2003). The great reversals: the politics of financial development in the twentieth century. Journal of financial economics, 69(1), 5-50. Rodrik, D., Subramanian, A., & Trebbi, F. (2004). Institutions rule: the primacy of institutions over geography and integration in economic development. Journal of economic growth, 9(2), 131-165. Rodrik, D. (2008). The real exchange rate and economic growth. Brookings papers on economic activity, 2008(2), 365-412. Rohatgi, V.K., Vijay, K., & Ehsanes , S.M. (2015). An Introduction to Probability and Statistics. New Jersey: Wiley. Quinn, D., Schindler, M., & Toyoda, A. M. (2011). Assessing measures of financial openness and integration. IMF Economic Review, 59(3), 488-522. Shaw, E (1973), Financial Deepening in Economic Development, New York: Oxford University Press. Shuaib (2016). Financial openness and economic growth in Nigeria (1960 - 2014), International Journal of Advanced Academic Research, 2(6). Retrieved from http://www.ijaar.org/articles/volume2-number6/ Social-Management-Sciences/ijaar-mgmt-v2n4-a16-p10.pdf as for October 28, 2017. Stiglitz, J. E. (2000). Capital market liberalization, economic growth, and instability. World development, 28(6), 1075-1086. Stiglitz, J. E. (2010). Contagion, liberalization, and the optimal structure of globalization. Journal of Globalization and Development, 1(2). Summers, L. H. (2000). International financial crises: causes, prevention, and cures. The American Economic Review, 90(2), 1-16. Sweidan, O. D. (2004). Does inflation harm economic growth in Jordan? An econometric analysis for the period 1970-2000. International Journal of Applied Econometrics and Quantitative Studies, 1(2), 41-66. Tekin, R. B. (2012). Development aid, openness to trade and economic growth in Least Developed Countries: bootstrap panel Granger causality analysis. Procedia-Social and Behavioral Sciences, 62, 716-721. Ulsan, B. (2012). “Openness to international trade and economic growth: A Cross-Country Empirical Investigation.” The Open-Assessment E-Journal, No. 25. The World Bank (2017) List of ASEAN countries by GDP. Retrieved from http://data.worldbank.org/indicator/NY.GDP. MKTP.CD as for August 15, 2017. The World Bank (2017) The World Bank annual report. Retrieved from http://pubdocs.worldbank.org/en/908481507403754 670/Annual-Report-2017-WBG.pdf as of October 28, 2017. Wacziarg, R., & Welch, K. H. (2008). Trade liberalization and growth: New evidence. The World Bank Economic Review, 22(2), 187-231. Wyplosz, C. (2002). How risky is financial liberalization in the developing countries?. Comparative Economic Studies, 44(2-3), 1-26. Xuan, N. T., & Xing, Y. (2008). Foreign direct investment and exports. The experiences of Vietnam. Economics of transition, 16(2), 183-197.

Financial openness and economic growth

Similar Items