Financial development and financial openness nexus: the precondition of banking competition

• Chen, Wang

• Hamori, Shigeyuki

• Kinkyo, Takuji

Abstract

We examine the dynamic relationship between financial development and financial openness using the pooled mean group estimator developed by Pesaran et al. (1999). Our results show that financial openness has a positive effect on financial development in the long run, but may have a negative effect in the short run. Using estimates of country-specific short-run coefficients, we also find that the adverse short-run effects of financial openness are associated with a lower degree of banking competition. The system generalized method of momentums (GMM) estimator also supports these findings, suggesting that the financial development and financial openness nexus is contingent on the degree of banking competition. A key policy implication is that a higher degree of banking competition is a precondition for financial openness to promote financial development.

Journal

• Applied Economics

  Applied Economics 48 (12), 1130-1139, 2016

  Taylor & Francis

Keywords

• Financial development
• financial openness
• banking competition
• pooled mean group (PMG) estimator
• GMM estimator

Details

• CRID: 1050856995323751552
• NII Article ID: 120006401501
• DOI: 10.1080/00036846.2015.1093087
• ISSN: 14664283
• ISSN: 00036846
• HANDLE: 20.500.14094/90004641
• Web Site: http://www.tandfonline.com/doi/pdf/10.1080/00036846.2015.1093087
• Text Lang: en
• Article Type: journal article
• Data Source:
  • IRDB
  • Crossref
  • CiNii Articles
  • KAKEN