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Nonlinear effects of financial openness on financial development in ASEAN

Author

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  • Nam, Hyun-Jung
  • Bang, Jeongseok
  • Ryu, Doojin

Abstract

This study examines the nonlinear effects of financial openness on financial development in the representative ASEAN member states: Indonesia, Malaysia, the Philippines, Singapore, and Thailand. It reveals that with a low (high) level of financial openness, the assets and liabilities of foreign direct investment increase (decrease) equity market capitalization and the financial development, institution, and market indices. We identify a threshold of financial openness where its positive impact begins to diminish; beyond this point, excessive financial openness may become detrimental to financial development. By reassessing the risks associated with financial openness after the Asian financial crisis, we can understand that the potential toxicity amplified by financial openness may pose threats to financial development.

Suggested Citation

  • Nam, Hyun-Jung & Bang, Jeongseok & Ryu, Doojin, 2024. "Nonlinear effects of financial openness on financial development in ASEAN," Journal of Multinational Financial Management, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:mulfin:v:73:y:2024:i:c:s1042444x24000112
    DOI: 10.1016/j.mulfin.2024.100846
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    More about this item

    Keywords

    ASEAN; Financial development; Financial openness; Market capitalization;
    All these keywords.

    JEL classification:

    • B17 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - International Trade and Finance
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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