Causal relationship between financial depth and economic growth: evidence from Asia-Pacific Countries

This study investigates the causality between financial depth and the economic performance of five selected large Asia-Pacific Countries consisting of China, India, Korea, Australia and New Zealand. Using pooled OLS regression for 20 year period annual data (1991-2012), the study finds bi-directional long-run causality between financial depth and economic growth. The study also find that ancillary variables such as inflation and investment share significant and positively caused economic growth. However, when financial depth become dependent variable only investment share provide clear relationship. The important implication for policy maker is that they should either improved financial markets or economic activities for future development and sustainability.