Financial deepening and economic growth in the Asia-Pacific region: a lesson from financial deregulation in Indonesia

Hiroyuki Taguchi ()

MPRA Paper from University Library of Munich, Germany

Abstract: The high economic growth in the Asia-Pacific region has been achieved by intensive investment. One of the prerequisites for intensive investment is financial deepening that establishes an efficient financial system to induce savings and mobilizes them to investors. This paper first presents the relationship between investment and financial depth that is typically affected by real interest rate, using cross-sectional data on developing Asia-Pacific countries and time-series data on Indonesia, then reviews financial deregulation of Indonesia in the context of the order of deregulation. The strategic implication of our findings is the importance of financial deepening and the sequencing of liberalization from real sector to financial market, as is proclaimed in McKinnon's treatise published in 1991.

Keywords: financial deepening; Asia-Pacific region; financial deregulation; Indonesia (search for similar items in EconPapers)
JEL-codes: E44 O47 (search for similar items in EconPapers)
Date: 1993-08-25
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Citations: View citations in EconPapers (1)

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