Financial Development, Financial Openness, and Economic Growth

45 Pages Posted: 23 Dec 2015

See all articles by Gemma Bolotaulo Estrada

Gemma Bolotaulo Estrada

Asian Development Bank - Economic Research

Donghyun Park

Asian Development Bank - Economic Research

Arief Ramayandi

Asian Development Bank - Economic Research

Date Written: August 2015

Abstract

A sound and efficient financial system is an indispensable ingredient of economic growth. It consists primarily of banks and capital markets, which channel savings into investments and other productive activities that contribute to economic growth and augment the economy’s productive capacity. This paper explains the importance of financial development and openness. It sifts through the literature on the relationship between both variables and economic growth. It then reports the results and discusses some original empirical analysis. In addition to using more updated data, which extend the sample period to include some postcrisis years, the analysis examines whether country characteristics and factors such as the exchange rate regime affect the finance–growth nexus.

Keywords: economic growth, exchange rate regime, financial development, financial openness

JEL Classification: C33, E44, F31, G20

Suggested Citation

Estrada, Gemma Bolotaulo and Park, Donghyun and Ramayandi, Arief, Financial Development, Financial Openness, and Economic Growth (August 2015). Asian Development Bank Economics Working Paper Series No. 442, Available at SSRN: https://ssrn.com/abstract=2707518 or http://dx.doi.org/10.2139/ssrn.2707518

Gemma Bolotaulo Estrada

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Donghyun Park (Contact Author)

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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