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Financial sector development and income inequality in ASEAN-5 countries: does financial Kuznets curve exists?

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  • Muhammad Azam
  • Syed Ali Raza

Abstract

This study investigates the influence of financial sector development on income inequality in ASEAN-5 countries, namely Indonesia, Malaysia, the Philippines, Singapore and Thailand between 1989 and 2013. We have constructed the financial development index for the selected ASEAN countries by applying the principle component method for the major four proxies of financial development available in literature, namely; domestic credit by the banking sector, domestic credit to the private sector, money supply and stock market capitalisation. Pedroni panel cointegration and Kao residual panel cointegration approaches confirm the valid long run relationship between considered variables. Results of fixed-effect model indicate that the different proxies of financial development have a positive and significant impact on income inequality in ASEAN-5 countries, while the squared term of financial development proxies have a negative and significant impact on income inequality. These findings confirm the presence of financial Kuznets hypothesis in ASEAN-5 countries during the period under the study.

Suggested Citation

  • Muhammad Azam & Syed Ali Raza, 2018. "Financial sector development and income inequality in ASEAN-5 countries: does financial Kuznets curve exists?," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 20(1), pages 88-114.
    • Handle: RePEc:ids:gbusec:v:20:y:2018:i:1:p:88-114
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    Citations

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    Cited by:

    1. Cong Minh Huynh & Nam Hoai Tran, 2023. "Financial development, income inequality, and institutional quality: A multi-dimensional analysis," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(2), pages 2242128-224, June.
    2. Boukraine, Wissem, 2020. "The finance-inequality nexus in the BRICS countries: evidence from an ARDL bound testing approach," MPRA Paper 101976, University Library of Munich, Germany.
    3. Mehmet Akif Destek & Avik Sinha & Samuel Asumadu Sarkodie, 2020. "The relationship between financial development and income inequality in Turkey," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 9(1), pages 1-14, December.
    4. Syed Ali Raza & Nida Shah & Imtiaz Arif, 2021. "Relationship Between FDI and Economic Growth in the Presence of Good Governance System: Evidence from OECD Countries," Global Business Review, International Management Institute, vol. 22(6), pages 1471-1489, December.
    5. Koçak Emrah & Uzay Nısfet, 2019. "The effect of financial development on income inequality in Turkey: An estimate of the Greenwood-Jovanovic hypothesis," Review of Economic Perspectives, Sciendo, vol. 19(4), pages 319-344, December.
    6. Prao Yao Séraphin & Kongoza Kouassi Cyrille, 2023. "Nonlinear Effect of Financial Development on Income Inequality: The Case of Ivory Coast," International Journal of Business and Management, Canadian Center of Science and Education, vol. 17(6), pages 1-57, February.
    7. Raza, Syed Ali & Shah, Nida, 2018. "Impact of Financial Development, Economic Growth and Energy Consumption On Environmental Degradation: Evidence from Pakistan," MPRA Paper 87095, University Library of Munich, Germany.
    8. Murat Cetin & Harun Demir & Selin Saygin, 2021. "Financial Development, Technological Innovation and Income Inequality: Time Series Evidence from Turkey," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 156(1), pages 47-69, July.
    9. Marta de la Cuesta-González & Cristina Ruza & José M. Rodríguez-Fernández, 2020. "Rethinking the Income Inequality and Financial Development Nexus. A Study of Nine OECD Countries," Sustainability, MDPI, vol. 12(13), pages 1-18, July.
    10. Mohammad Aladwan, 2018. "Accounting Measurement Revolution and Market Value," Modern Applied Science, Canadian Center of Science and Education, vol. 12(11), pages 279-279, November.
    11. Theodora Sotiropoulou & Stefanos Giakoumatos & Antonios Georgopoulos, 2023. "Financial development, economic growth, and income inequality: a Toda-Yamamoto panel causality test," Economics and Business Letters, Oviedo University Press, vol. 12(2), pages 172-185.

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