Examining the relationship between finance, institutions and economic growth: evidence from the ASEAN economies

• Published in: Economic change and restructuring Vol. 53; no. 4; pp. 519 - 542
• Main Author: Haini, Hazwan
• Format: Journal Article
• Language: English
• Published: New York Springer US 01-11-2020; Springer Nature B.V
• Subjects: Development Economics; Economic Growth; Economic Policy; Economics; Economics and Finance; Finance; Financial institutions; Institutions; International Economics; Macroeconomics/Monetary Economics//Financial Economics; Markets; Political Economy/Economic Systems; Securities markets; Southeast Asia; E44; G20; Economic growth; Financial development; ASEAN; O40; O53; Institutions
• ISSN: 1573-9414; 1574-0277
• DOI: 10.1007/s10644-019-09257-5

This study investigates the role of financial and institutional development on economic growth in the Association of Southeast Asian Nations (ASEAN) economies from 1995 to 2017 using a dynamic panel estimator. Financial development is instrumental in promoting economic growth; however, the effect of financial institutions and financial markets can differ. In recent years, the ASEAN economies have launched financial and institutional integration initiatives towards the goal of an integrated ASEAN Economic Community, which can have a profound impact on economic growth. The estimated results show that financial institutions are positive and significant towards economic growth, while financial markets are insignificant. Equally important, institutional quality plays a significant and positive role in economic growth. More interestingly, the study finds that institutional development is complementary to financial institutions and markets. Member states should emphasise on further financial integration across the ASEAN economies, allowing for the development of financial institutions and markets alongside improvements in institutional quality to increase the effectiveness of financial development.