Globalisation, Institutional Reforms and Financial Development in East Asian Economies

摘要

Maintaining high levels of financial development has always been a central policy concern, since greater development in this sector tends to promote growth, as recognised in the empirical literature. This study examines the role of globalisation in influencing financial development of eight East Asian economies from 1984 to 2008. In particular, we aim to evaluate whether globalisation indeed improves institutional reform, and whether in turn these sound institutions are essential in promoting financial development, a hypothesis put forward by Mishkin (2009). The empirical strategies are based on panel data methods to test for long-run and short-run dynamic relationships. Although globalisation has been gaining popularity in recent years, especially in promoting economic growth in these economies, there has been no available econometric evidence to trace the link between globalisation and financial development. As financial development becomes a reality as a source of economic growth, it is important to understand how the role of globalisation affects financial development.