Financial Deepening of Selected ASEAN Nations
The aftermath effects of the recent global financial crisis have reinforced the vital role that the financial sector plays in an economy in addition to its other conventional inputs in labour and capital. This study is an attempt to explore the financial deepening of selected ASEAN economies under three major crises that occurred at global and regional levels over the past two decades. Principal component analysis technique was exploited in order to compute the composite index of financial deepening. An attempt was also made to identify the prominent indicators of financial deepening in the selected ASEAN economies. It is found that while Thailand experienced a developed financial system in the early 1990s, Indonesia, Malaysia and Philippines only attained it in the mid-1990s. The financial systems of these economies were severely affected by the Asian financial crisis and it has been a struggle to maintain the pre-crisis level of development. However, all these economies, with the exception of Thailand have exhibited stable behaviour in the recent crises period. Thailand’s financial system has been volatile and this could be attributed to inconsistency among the institutional and market based indicators.