Siong Hook Law

Financial Development, Openness and Institutions: Evidence from Panel Data

Utilising four annual panel datasets and dynamic panel data estimation procedures we find that trade and financial openness, as well as economic institutions are statistically important determinants of the variation in financial development across countries and over time since the 1980s. However, we find mixed support for the hypothesis that the simultaneous opening of both trade and capital accounts is necessary to promote financial development in a contemporary setting.

Trade Openness, Capital Flows and Financial Development in Developing Economies

This paper examines the impact of trade openness and capital flows on financial development in developing countries using a dynamic panel GMM estimation technique. The empirical results reveal that trade openness and capital flows are statistically significant determinants of financial development. Simultaneous opening of both the trade and capital accounts also appear to have positive impacts on financial development. The evidence also suggests that openness leads to improved financial development through institutional quality and competition channels. However, the institutional channel outperforms competition in ensuring the positive effects of openness on financial market depth in developing countries.

Openness, Institutions and Financial Development

[This paper is no longer available. It has been replaced by paper 07/5: Financial Development, Openness and Institutions: Evidence from Panel Data.] Using cross-country and dynamic panel data techniques on 43 developing countries during 1980 – 2000, we provide evidence which suggests that financial development is enhanced when a country’s borders are simultaneously open to both capital flows and trade. Our findings also suggest that institutional quality is a statistically significant independent determinant of financial development. Our findings are robust to alternative measures of financial and trade openness, as well as estimation method and sample period.

Financial Development and Income Inequality at Different Levels of Institutional Quality

We examine whether the relationship between financial development and income inequality varies with levels of institutional quality. The empirical evidence based on the threshold regression approach shows that there indeed exists an institutional quality threshold effect in the relationship between financial development and income inequality. Financial development tends to reduce income inequality only after a certain threshold level of institutional quality has been achieved. Until then, the effect of financial development on income inequality is nonexistent. This finding suggests that institutional quality affects the link between financial development and income inequality, reflecting the notion that better quality finance results in more equal income distribution.

Resource Curse: New Evidence on the Role of Institutions

This paper attempts to provide a probable answer to a longstanding resource curse puzzle; i.e., why resource-rich nations grow at a slower rate compared with less fortunate ones. Using an innovative threshold estimation technique, the empirical results reveal that there is a threshold effect in the natural resources–economic growth relationship. We find that the impact of natural resources is meaningful to economic growth only after a certain threshold point of institutional quality has been attained. The results also shed light on the fact that the nations that have low institutional quality depend heavily on natural resources while countries with high quality institutions are relatively less dependent on natural resources to generate growth.

Dynamic impact of urbanization, economic growth, energy consumption, and trade openness on CO 2 emissions in Nigeria

The objective of this paper is to examine the dynamic impact of urbanization, economic growth, energy consumption, and trade openness on CO2 emissions in Nigeria based on autoregressive distributed lags (ARDL) approach for the period of 1971–2011. The result shows that variables were cointegrated as null hypothesis was rejected at 1xa0% level of significance. The coefficients of long-run result reveal that urbanization does not have any significant impact on CO2 emissions in Nigeria, economic growth, and energy consumption has a positive and significant impact on CO2 emissions. However, trade openness has negative and significant impact on CO2 emissions. Consumption of energy is among the main determinant of CO2 emissions which is directly linked to the level of income. Despite the high level of urbanization in the country, consumption of energy still remains low due to lower income of the majority populace and this might be among the reasons why urbanization does not influence emissions of CO2 in the country. Initiating more open economy policies will be welcoming in the Nigerian economy as the openness leads to the reduction of pollutants from the environment particularly CO2 emissions which is the major gases that deteriorate physical environment.

Economic Globalization and Financial Development in East Asia: A Panel Cointegration and Causality Analysis

This study examines the role of economic globalization in financial development in eight East Asian economies. The heterogeneous panel cointegration test reveals that cointegration is present among economic globalization, institutions, financial development, real gross domestic product per capita, and financial reforms. The Granger causality test results indicate that economic globalization has a significant causal influence on institutional quality, and institutional reforms have in turn facilitated and supported financial development, in particular of the banking sector in East Asia. Economic globalization is also found to have a favorable causal impact on stock market development without going through the institutional quality channel.

Openness and Financial Development

This article examines the effect of openness on financial development pertaining to the Rajan and Zingales (2003) hypothesis, namely that simultaneous openness of trade and capital flows has a positive influence on financial development. They hypothesise that when a countrys borders are open to both trade and capital flows, it will deliver benefits to the financial markets. The dynamic heterogeneous panel data results based on 68 countries for the period 1980–2001 indicate that simultaneously open product and capital markets do promote better financial development. Openness in terms of trade and capital are most potent in promoting financial development in middle–income countries, whereas its influence is relatively small in low–income and high–income countries.

Globalisation, Institutional Reforms and Financial Development in East Asian Economies

This study investigates the dynamic effects of globalisation on institutions and financial development in East Asian economies using panel data tests. Our empirical results demonstrate that globalisation has a significant influence on institutional quality, and that institutional reforms in turn facilitate and support financial development, in particular the development of the banking sector in East Asia. Globalisation is also found to have a favourable direct impact on stock market development without passing through an institutional quality channel.

Tourism and CO2 emissions nexus in Southeast Asia: new evidence from panel estimation

The past decade has seen the rapid development of the tourist industry in Southeast Asia. There is increasing concern that tourism is highly affecting CO2 emissions, but the nature of the relationship is still unclear. The main target of this paper is to investigate the existence of a linear and/or nonlinear relationship between tourism and CO2 emissions in the five most important countries located in Southeast Asia, using the panel cointegration and pooled mean group techniques. The results indicate that tourism and CO2 emissions are cointegrated, implying that tourism affects CO2 emissions in the long run. Our findings support the nonlinear relationship between tourism and emissions as well as economic activities and CO2 emissions. Accordingly, an inverted U-shaped relationship exists between tourism and emissions confirming the existence of an Environmental Kuznets Curve in the Southeast Asian tourism industry. Furthermore, the empirical results show that economic activities and energy consumption greatly increase emissions.