Does financial development improve human capital accumulation in the Southeast Asian countries?

Abstract

Financial development and human capital's crucial roles in economic growth have been widely recognized in the literature. However, a direct link between financial development and human capital, in the long run, has not been investigated, in particular in emerging markets in Asia. This study investigates the nexus between financial development and human capital for a group of nine emerging markets in the Southeast Asian region over the period 1990-2018. Econometric techniques allowing for cross-sectional dependence and panel cointegration, such as the dynamic least squares (DOLS) and fully modified least squares (FMOLS), are used. We also use three indicators as the proxies for financial development: broad money supply, bank credit, and private sector credit. Empirical findings from this paper indicate that financial development contributes positively and significantly to human capital accumulation. We also find that economic growth enhances the formation of human capital. Results from our Granger causality tests confirm a bi-directional relationship between financial development and ABOUT THE AUTHOR Duc Hong Vo is Professor, and practitioner, of Applied Economics and Finance. Duc has more than 20 years of teaching experience in Australia and Vietnam. More than 100 papers from his research have been published in international journals including Renewable Energy,

Effects of financial development and capital accumulation on labor productivity in sub-Saharan Africa: new insight from cross sectional autoregressive lag approach

“…Accordingly, the variables used are capable of producing prolific results as shown to be stationary. The findings of the stationarity tests confirm the results of Hong et al (2021) regarding production, FD, and income in South Asian countries. However, the Westerlund ECM panel cointegration result reveals that the presence of long-run equilibrium relationships among variables is still confirmed for the panels from the economic perspective, which implies that the utilized CAPTA and financial indicators have elastic longterm effects on labor productivity.…”

“…However, such an assumption is contrary to others because of the weakness in their financial system, whereby the reappearance of FI does not observe the normal distribution aspect. Therefore, a nonlinear connection tends to appear among FI (Hong et al 2021;Li et al 2018). Bernier and Plouffe (2019) studied the development spending in the financial sector and financial innovation research using a panel of 23 countries during the 1996-2014 period.…”

“…Therefore, the following model is considered: Finally, for improved economic development and performance, CAPTA and labor productivity are considered prerequisites. Other basics include growth in FI development, FM development, which transforms into an improved labor force, and technical progress along with the monetary impact (Hong et al 2021;Asongu and Acha-Anyi 2020).…”

Enhancing Human Capital in Indonesia: Does Economic Policy Work?

“…The POP increases the chances of creating higher innovations and technological advances. Technological progress is a source of economic growth and high economic growth encourages an increase in the quality of human resources [15,38]. The total POP is able to increase HDI in all provinces in Indonesia.…”

Does financial development affect human capital? Evidence from Vietnam

“…Their results reveal that the influence of FD is symmetric in the short run but asymmetric in the long run. Other studies have also been conducted to examine the inter-relationship between FD, HC, economic growth and other macroeconomic variables for Vietnam or various samples (Nguyen et al , 2021a, 2021b; Tran et al , 2021; Vo and Vo, 2020a, 2020b; Vo et al , 2021; and Vo, 2022).…”