Open AccessThe Threshold Effect of Regulatory Quality on the Relationship between Financial Development and Economic Growth: Evidence from Asian Countries
Author(s) -
Gengnan Chiang,
ChinChi Liu,
Hui-Hsuan Liu
Publication year - 2022
Publication title -
advances in management and applied economics
Language(s) - English
Resource type - Journals
ISSN - 1792-7544
DOI - 10.47260/amae/1216
Subject(s) - stock market , soundness , economics , panel data , stock (firearms) , quality (philosophy) , corporate governance , monetary economics , business , finance , econometrics , mechanical engineering , paleontology , philosophy , linguistics , epistemology , horse , engineering , biology
This study aims to provide new insights on examining whether regulatory qualityinfluences the relation between financial development and economic growth byapplying a nonlinear panel smooth transition regression (PSTR) model. Using thedata from Worldwide Governance Indicators (WGI) to assess the soundness ofregulatory quality, this paper finds that the relationship between financialdevelopment, including life insurance and stock markets, and economic growth issignificantly positive in the countries with relatively better regulatory quality. Ourfindings not only indicate that sound regulatory quality could encourage the growtheffect of life insurance and stock market sectors but also have far-reaching practicalimplications for other economies to realize regulatory quality should matter for thedevelopment of economic growth.JEL classification numbers: E44, G22, O11, O47, P34.Keywords: Regulatory quality, Life insurance development, Stock marketdevelopment, Economic growth, Nonlinear panel smooth transition regression(PSTR) model.