Financial Depth, Gross Fixed Capital Formation and Economic Growth: Empirical Analysis of 18 Asian Economies

Abstract

This paper investigated the relationship among Financial Depth, Gross Fixed Capital Formation and Economic Growth of 18 Asian countries. Using panel data from 1990 to 2017, we document a significant impact of Gross Fixed Capital Formation and Financial Depth on Economic Growth. While Gross Fixed Capital Formation is found to positively affect Economic Growth, Financial Depth is found to impede Economic Growth. Our robust checks produce consistent results. We also find a positive effect of Net Inflow of FDI on Economic growth.

Policy recommendation is that emphasis should be placed on measures that increase investment in Gross Fixed Capital Formation and FDI.

Keywords: Economic Growth, Gross Fixed Capital Formation, Net Inflow of FDI, Financial Depth, Broad Money, Asian Countries