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Financial Deepening and Economic Growth in Transition Economies of Southeast Asia: A Geweke Causality Analysis

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  • Khee Giap Tan

    (National University of Singapore, Singapore)

  • Sasidaran Gopalan

    (National University of Singapore, Singapore)

  • Phuong Anh Nguyen Le

    (National University of Singapore, Singapore)

Abstract

Cambodia, Laos and Vietnam (CLV) have come to be recognized as the new growth frontiers in the Association of Southeast Asian Nations (ASEAN) bloc, especially since the 2000s. Though all the CLV countries were hit by the global financial crisis (GFC), there has been a sharp recovery in all the economies from around 2010 or so, partly aided by the rapid development of their financial sector. While this has formed the basis for optimism about the growth potential of these countries, there have also been concerns that these countries have been experiencing a period of excessive credit growth – an offshoot of rapid financial deepening – which in turn is hampering growth and aggravating financial instability. In light of this discussion, this paper examines the nexus between financial deepening and economic growth employing a Geweke causality framework with quarterly data for CLV countries from 1996 to 2010.

Suggested Citation

  • Khee Giap Tan & Sasidaran Gopalan & Phuong Anh Nguyen Le, 2017. "Financial Deepening and Economic Growth in Transition Economies of Southeast Asia: A Geweke Causality Analysis," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 20(03), pages 1-25, September.
    • Handle: RePEc:wsi:rpbfmp:v:20:y:2017:i:03:n:s0219091517500163
    DOI: 10.1142/S0219091517500163
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    2. Mollah Aminul Islam & Haiyun Liu & Muhammad Asif Khan & Sultanuzzaman MD Reza & Yassin Elshain Yahia & Layla Nasrin, 2018. "Causal Relationship between Economic Growth, Financial Deepening, Foreign Direct Investment and Innovation: Evidence from China," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(8), pages 1086-1101, August.

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