Threshold of financial- banking system development in Asian countries

Abstract

By threshold regression for panel data, this study provides a new empirical evidence on development of financial - banking system for enhancing economic growth in 33 Asian countries (including Vietnam). The results confirm that relationship of financial-banking system development and economic growth is nonlinear. There is a threshold at which financial-banking system development shows positive effects on growth of GDP; beyond this turning point financial-banking system development will negatively impact on growth. This implies that high level of financial-banking system development is not always beneficial for national economic growth. Nowadays, an optimal level of financial-banking system development which fosters sustainable growth should be taken into consideration for those countries