Financing Asia's Growth

Peterson Institute for International Economics Working Paper No. 15-3

16 Pages Posted: 28 May 2016

See all articles by Gemma Bolotaulo Estrada

Gemma Bolotaulo Estrada

Asian Development Bank - Economic Research

Marcus Noland

Peter G. Peterson Institute for International Economics; East-West Center

Donghyun Park

Asian Development Bank - Economic Research

Arief Ramayandi

Asian Development Bank - Economic Research

Multiple version iconThere are 3 versions of this paper

Date Written: March 1, 2015

Abstract

Developing Asia has exhibited rapid growth while saddled with relatively backward financial systems. One might conclude that the coexistence of sustained rapid growth and financial underdevelopment in developing Asia implies that an efficient financial sector is not indispensable for economic development. A more considered view would be that developing Asia grew rapidly despite, not because of, financial underdevelopment. With a stronger and better financial system, it might have grown even faster or achieved the same level of growth with lower savings and investment (and hence a lower cost in terms of forgone consumption). Strengthening the region's financial sectors was made more difficult by the global financial crisis, which gave financial development a bad name. However, in developing Asia financial sector development refers less to the introduction of esoteric products than to the more basic task of building efficient banks and capital markets. There is clearly a positive relationship between financial development and growth up to a certain level of financial development. Although it is possible that the relationship turns insignificant or even negative beyond some threshold, developing Asia is well short of that possible turning point.

Keywords: Asia, financial development, financial inclusion, financial instability

JEL Classification: G18, G28, N25, O16

Suggested Citation

Estrada, Gemma Bolotaulo and Noland, Marcus and Park, Donghyun and Ramayandi, Arief, Financing Asia's Growth (March 1, 2015). Peterson Institute for International Economics Working Paper No. 15-3, Available at SSRN: https://ssrn.com/abstract=2587980 or http://dx.doi.org/10.2139/ssrn.2587980

Gemma Bolotaulo Estrada (Contact Author)

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Marcus Noland

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

East-West Center ( email )

1601 East-West Road
Honolulu, HI 96848-1601
United States

Donghyun Park

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Arief Ramayandi

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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