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Threshold Effects Of Trade Openness On Financial Development: The Case Of The Asean Region

Author

Listed:
  • HYUN-JUNG NAM

    (Division of Shipping Management, National Korea Maritime & Ocean University, 27 Taejong-ro, Yeongdo-gu, Busan, Korea)

  • MEHMET HUSEYIN BILGIN

    (Faculty of Political Sciences, Istanbul Medeniyet University, Istanbul, Türkiye)

  • DOOJIN RYU

    (Department of Economics, Sungkyunkwan University, 25-2 Sungkyunkwan-ro, Jongno-gu, Seoul 03063, Korea)

Abstract

This study examines the effect of trade openness on financial development in eight representative ASEAN countries, including Singapore. Low levels of exports and imports positively influence the depth, accessibility, and efficiency of financial development. Beyond a certain threshold, the benefits of trade openness for financial development begin to diminish. This threshold is lower than the mean value of trade openness, indicating that the ASEAN market possesses high trade flows but its financial sector remains of low quality. In the ASEAN region, the current financial development index is suboptimal compared to trade openness. Prioritizing improvements in financial development quality is thus crucial for mitigating the potential risks associated with excessive trade openness.

Suggested Citation

  • Hyun-Jung Nam & Mehmet Huseyin Bilgin & Doojin Ryu, 2025. "Threshold Effects Of Trade Openness On Financial Development: The Case Of The Asean Region," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 70(01), pages 125-155, March.
    • Handle: RePEc:wsi:serxxx:v:70:y:2025:i:01:n:s0217590824500486
    DOI: 10.1142/S0217590824500486
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    Keywords

    ASEAN; export; financial development; import; trade openness;
    All these keywords.

    JEL classification:

    • B27 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - International Trade and Finance
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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