The Role of Financial Development in Economic Growth-Panel Data Empirical Studies on the Experiences from Taiwan, Japan and Korea
Date Issued
2010
Date
2010
Author(s)
Fan, Ken-Wei
Abstract
This paper employed the dynamic panel data of Taiwan, Japan and South Korea during the period from 1981 to 2009 in order to examine the role of financial development in economic growth. Being different form the earlier references, this paper not only considered the effect that banking system made on economic growth, it also gave considerations to stock market development and capital market liberalization. The panel unit root test, principal components analysis, first difference GMM and system GMM had been utilized as methodology in this paper. In order to examine the stationarity, the data was tested by unit root test first. And then, we utilized principal components analysis to deal with the multicollinear among the variables measuring financial development. General method of movements (GMM) has been employed to estimate the relationship between financial development and economic growth.GMM could also prevent the estimation from bias which might be caused by endogenous variables.
After the empirical research, we have discovered the empirical results among these three economies. According to the coefficient of financial aggregate, financial development may have negative impact on economic growth. Regarding stock market, Turnover and Stock Return both have positive effects on economic growth. And, market Capitalization could also make positive impact on economic growth. In the concept of capital market, the empirical results reveal that both capital outflow and capital inflow would harm economic growth after the capital liberalization.
Subjects
Financial development
economic growth
dynamic panel data model
panel unit root test
general method of movement
SDGs
Type
thesis
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