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Financial deepening and economic growth in the Asia-Pacific region: a lesson from financial deregulation in Indonesia

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  • Taguchi, Hiroyuki

Abstract

The high economic growth in the Asia-Pacific region has been achieved by intensive investment. One of the prerequisites for intensive investment is financial deepening that establishes an efficient financial system to induce savings and mobilizes them to investors. This paper first presents the relationship between investment and financial depth that is typically affected by real interest rate, using cross-sectional data on developing Asia-Pacific countries and time-series data on Indonesia, then reviews financial deregulation of Indonesia in the context of the order of deregulation. The strategic implication of our findings is the importance of financial deepening and the sequencing of liberalization from real sector to financial market, as is proclaimed in McKinnon's treatise published in 1991.

Suggested Citation

  • Taguchi, Hiroyuki, 1993. "Financial deepening and economic growth in the Asia-Pacific region: a lesson from financial deregulation in Indonesia," MPRA Paper 64844, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:64844
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    File URL: https://mpra.ub.uni-muenchen.de/64844/1/MPRA_paper_64844.pdf
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    References listed on IDEAS

    as
    1. Morisset, Jacques, 1993. "Does financial liberalization really improve private investment in developing countries?," Journal of Development Economics, Elsevier, vol. 40(1), pages 133-150, February.
    2. Roubini, Nouriel & Sala-i-Martin, Xavier, 1992. "Financial repression and economic growth," Journal of Development Economics, Elsevier, vol. 39(1), pages 5-30, July.
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    Cited by:

    1. Taguchi, Hiroyuki, 1995. "Policy assignment on money supply: the case of Indonesia in the 1980s," MPRA Paper 63813, University Library of Munich, Germany.

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    More about this item

    Keywords

    financial deepening; Asia-Pacific region; financial deregulation; Indonesia;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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