The convergence of financial sector in Asia

Maria Pinita Angelia,Rudi Purwono

doi:10.20525/ijrbs.v10i6.1319

Abstract

This study aims to identify the convergence of financial sector development and the effect of macroeconomic variables on each financial sector development indicator in Asia. The sample used consists of 24 countries in Asia during the period 2010-2018. Identification of convergence using ?-convergence absolute and conditional. Indicators are used to represent the development of the financial sector namely private credit, liquid liabilities, stock market capitalization, and stock market turnover. Empirical evidence was based on the Generalized Method of Moment (GMM) estimation technique. The results showed that there was convergence in Asia and that macroeconomic variables had a significant effect on the development of the financial sector.

Highlights

Financial sector development had a big role in economic development and often used as a benchmark in the success of a country (Svirydzenka, 2016)
This study aims to identify the convergence of financial sector development and the effect of macroeconomic variables on each financial sector development indicator in Asia
The estimation results for the four lag variables in the model each showed values of 0.742, 0.680, 0.945, and -0.558 which were significant at the 10%, 5%, and 1% levels, indicating that there was absolute convergence in the development of the financial sector in Asia because the value the coefficient lag variable has a value of less than 1

Summary

Introduction

Financial sector development had a big role in economic development and often used as a benchmark in the success of a country (Svirydzenka, 2016). The differences in the development of the financial sector in each country could create a gap between developing and developed countries. Financial sector development gap between developed and developing countries must be reduced, if left unchecked, the gap between developed and developing countries would continue to increase. The concept of convergence could be used to reduce the development gap of the financial sector. This convergence concept was initiated by Barro and SalaiMartin (Veysov and Stolbov, 2011). This concept explained how a lagging country could catched up with developed countries, so that convergence would reduce the gap and increased prosperity (Nurhamidah and Suhartini, 2014)

Objectives

Results

Conclusion