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The Threshold Effect of Regulatory Quality on the Relationship between Financial Development and Economic Growth: Evidence from Asian Countries

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  • Gengnan Chiang
  • Chin-Chi Liu
  • Hui-Hsuan Liu

Abstract

This study aims to provide new insights on examining whether regulatory quality influences the relation between financial development and economic growth by applying a nonlinear panel smooth transition regression (PSTR) model. Using the data from Worldwide Governance Indicators (WGI) to assess the soundness of regulatory quality, this paper finds that the relationship between financial development, including life insurance and stock markets, and economic growth is significantly positive in the countries with relatively better regulatory quality. Our findings not only indicate that sound regulatory quality could encourage the growth effect of life insurance and stock market sectors but also have far-reaching practical implications for other economies to realize regulatory quality should matter for the development of economic growth. JEL classification numbers: E44, G22, O11, O47, P34.

Suggested Citation

  • Gengnan Chiang & Chin-Chi Liu & Hui-Hsuan Liu, 2022. "The Threshold Effect of Regulatory Quality on the Relationship between Financial Development and Economic Growth: Evidence from Asian Countries," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 12(1), pages 1-6.
    • Handle: RePEc:spt:admaec:v:12:y:2022:i:1:f:12_1_6
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    References listed on IDEAS

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    More about this item

    Keywords

    Regulatory quality; Life insurance development; Stock market development; Economic growth; Nonlinear panel smooth transition regression (PSTR) model.;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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