The Effect of Financial Development on Economic Growth; Incorporation with Impact of the COVID-19 Pandemic: Evidence from Asian Frontier Financial Markets

Abstract

This study aimed to investigate how financial development affects economic growth and explore the relationship between financial development and economic growth. The sample considered for the study were Asian frontier financial markets (Sri Lanka, Bangladesh, Pakistan, and Vietnam). The considered period ranged from 1992 to 2021. This study uses a quantitative approach, and the research logic is deductive because the hypotheses are made in the study and the results are assessed. Panel regression is used as the main statistical analysis model. This study concludes that financial development significantly impacts economic growth in the Asian frontier financial markets. The results show both negative and positive figures in individual independent variables. But when those results are considered combined, it offers a positive impact. In addition to the main analysis, another analysis was done to find the impact of the COVID-19 pandemic on the economic growth in Asian frontier financial markets. The results show that the COVID-19 pandemic has had a significant negative impact on the economic growth of the sample selected. The significance of this study is to analyze the impact over 30 years and measure the impact of the COVID-19 pandemic simultaneously.