Financial openness and growth: Case study of Great Mekong subregion (Cambodia-Laos-Myanmar-Vietnam)

Abstract

     The study investigated the empirical evidence of the relationship between financial openness and output growth for the Cambodia-Laos-Myanmar- Vietnam (CLMV) countries using data from 2000 to 2014. The model was based on the Solow growth model and included human and financial factors. The dynamic panel model was estimated using the general method of moment to overcome shortcomings due to endogeneity. The results showed that the impact of physical capital was not significant on output growth while an increase in labor input resulted in a positive and significant impact on output growth because of the productivity effect. Additionally, a more open capital account had a positive effect on output growth. Hence, viewing the benefits of financial openness, the policy makers in the CLMV countries should enhance the roadmap of financial liberalization and improve their financial structures to support financial liberalization in ASEAN.