DefinePK

Abstract

Macroeconomic growth and stability are two of the major benefits of financial development, though there are differences in the literature on the channels through which this growth and stability can be achieved. In recent years, a number of emerging economies experienced phenomenal growth. At a micro level, one needs to understand why and how financial deepening could bring changes in economic agents’ behavior leading to an impact on the saving- investment relationship. At the macro level, financial development, integration and globalization could be possible channels to growth. The purpose of this paper is two-fold. First, we provide a comprehensive discussion of the theoretical and empirical literature on the role of important micro- and macro-policy variables in achieving macroeconomic stability with reference to Southeast Asia. Second, we present new empirical evidence using data from a selected sample of countries from the Asia Pacific region on the links between financial integration, trade integration and growth.