The Dynamic Link between Bank Competition Access to Finance and Economic Growth in Selected Asian Countries
The Dynamic Link between Bank Competition Access to Finance and Economic Growth in Selected Asian Countries

Summary/Abstract: The dynamic causal relationship between bank competition, financial access, and economic growth has been widely studied in many countries both developed and developing countries. However, the results of a lot of studies demonstrate a controversial point of view and diverse conclusions. This study aims, firstly to investigate the short-run dynamic causal relationship between bank competition, access to finance and economic growth. Secondly, to examine the long-run effect and causality relationship between bank competition, financial access, and economic growth. This study applied the quantitative method approach by employing PVECM, FMOLS, and DOLS. All data was collected from the Asia Development Bank (ADB) and World Development Indicators (World Bank) in the panel data set of 25 selected Asian countries during the period 1995-2018. This empirical study found strong evidence of the long-run effect that supports the market power hypothesis, which predicts that low competition adversely affects access to finance which consequently reduces economic growth. In addition, this study revealed that there was a long-run feedback causal relationship between access to finance and economic growth. Hence the financial access is one of the long-run engines of growth, in turn, economic growth also has a long-term significant effect and positively related to financial access.

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