Relationship Among International Trade, Financial Development, and Economic Growth: The Case of ASEAN

Abstract

This study investigated the existence of relationship among international trade, financial development, and economic growth for ASEAN as a group and individual countries, using annual data covering the period 2010–2019 for the analysis by Bayesian regression and Bayesian Model Averaging (BMA) methods. In this study separated financial development in two group of variables consist of financial development variables and cashless variables. For this study defines definition of cashless that mean not using money in the form of coins and notes or operating with credit and debit cards and electronic systems. Therefore, cashless variables in this study include credit card transaction value (CRC), debit card transaction value (DBC), and e-money transaction value (EM). The study results reveal that, for ASEAN as a group, there are four variables most appropriate to describe real GDP namely domestic credit to private sector (DCP), inflation (I), stock trade (ST), and export (EXP) but the cashless variables do not show effect on real GDP. For individual countries, the results reveal the sets of variables explaining real GDP to be different across countries. Cashless variables in particular affect real GDP of only some countries in the group. Based on the results, this paper offers some imperative policy recommendations.