Financial Globalisation and Economic Growth in Asia: Is There a Difference between Upper-Middle-Income and Lower-Middle-Income Countries?

Background: Although financial globalisation has been a widely debated topic recently, there remains a wide range of conflicting views on the matter. Additionally, there is a lack of empirical research on this subject in middle-income countries, particularly those examining the differential impacts of financial globalisation on economic growth between upper-middle-income and lower-middle-income countries. Objective: This study investigates the impact of financial globalisation on economic growth in middle-income countries in Asia from 2002-2021. It specifically examines the differential effects of financial globalisation between upper-middle-income and lower-middle-income countries. Methodology: The study employs the Bayesian approach to estimate the impact of financial globalisation on economic growth, offering insights into both the extent and probability of this relationship. Additionally, the Generalised Method of Moments (GMM) is utilised to validate the robustness of the findings. Result: The findings indicate a significant and positive impact of financial globalisation on economic growth across middle-income countries in Asia, with a probability of 100 percent. Importantly, the impact is more pronounced in lower-middle-income countries than their upper-middle-income counterparts. Conclusion: These findings suggest that middle-income countries in Asia can effectively leverage financial globalisation to foster economic growth. Unique Contribution: This study significantly contributes to theory and practice by clarifying the impact of financial globalisation on economic growth. Furthermore, it sheds light on the differences in this impact between lower-middle-income and upper-middle-income countries. Key Recommendation: This study's findings provide a reliable basis for the countries in the sample to identify appropriate solutions to promote financial globalisation linked with economic growth. Accordingly, middle-income countries in Asia should make further efforts to improve their level of financial globalisation, which is particularly crucial for lower-middle-income countries.