Do Globalization and Institutional Reforms Matter for Financial Structure in Selected Asian Countries? A Panel Data Approach

Madhu Sehrawat and Arun Giri

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2019, vol. 65, issue 2, 87-100

Abstract: This present study aims to examine the dynamic relationship between globalization, institutional reforms, and financial development in the context of South Asian economies over the period 1985–2015 by employing panel data methods. The Westerlund (2007) panel co-integration test result indicates that there exists a long-run equilibrium relationship between globalization, institutional reforms, and financial development. The findings of panel dynamic ordinary least squares (PDOLS) indicate that the effect of globalization is positive and statistically significant to financial development. Furthermore, the empirical evidence of a dynamic panel error-correction model reveals a unidirectional causal relationship running from globalization and institutional reform to financial development. In terms of policy recom-mendations, the study suggests that it is vital to focus on globalization and institutional reforms to promote effectiveness of the financial system and economic performance in the region.

Keywords: Globalization; Institutional Reforms; South Asia; Panel Dynamic OLS (PDOLS); Panel Causality (search for similar items in EconPapers)
Date: 2019
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Applied Economics Quarterly (formerly: Konjunkturpolitik) is currently edited by Cinzia Alcidi, Christian Dreger and Daniel Gros

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