Financial Development, Economic Growth and Financial Crisis in Asian Emerging Economies: Data

Use of Quarterly Data and Disaggregation of GDP Series
One important departure of this study is the use of quarterly frequency data (Note 2). Two rationales are given as follows. First, in performing time series analysis, more observations can help obtain statistically acceptable estimates. Especially, as far as developing countries like our sample are concerned, their annual data series cover only a limited span and thus provide fewer observations. Second, as discussed below in Financial Crisis Indicator, the quarterly volatility in each elementary variable is calculated to produce the financial crisis indicator (FC). We argue that quarterly frequency is the best time size to measure volatility and take it into estimation. If monthly volatility is used, it is constantly fluctuating. Besides if annual volatility is computed, it is less fluctuating or actually is a pulse dummy highlighting a crisis year only. Retailing in rural

In line with the use of quarterly frequency data, the five countries’ annual nominal- and real per capita GDP (nominal GDP deflated by the GDP deflator and the population) series are disaggregated to quarterly ones through the method developed by Chow and Lin as the quarterly GDP series fully covering the planned period 1982Q1 to 2007Q4 were not available through all the countries. Nominal GDP series are used as a deflator in calculating several elementary variables of financial development and financial repression, and the volatility in nominal GDP is measured as one of the elementary variables of financial crisis (see Appendixes 1, 2 and 4). Likewise, we compute quarterly real per capita GDP and take its logarithm as the economic growth indicator (EG). The five countries’ nominal GDP and EG series are plotted in Appendixes 5 to 9. As illustrated, India’s EG shows prominent fluctuations around the crisis year 1991, whereas those of four countries show a clear change around the period 1997 to 1998.
Summary Indicators
In subsequent discussion, we elucidate three summary indicators of the financial development indicator (FD), financial crisis indicator (FC) and financial repression indicator (FR), respectively, which are produced through the principal component approach. The use of the principal component approach to making summary indicators was pioneered by Demetriades and Luintel and followed by Ang and McKibbin. For conserving space, all information relevant to creating summary indicators is not presented but is given on request. The plots of five countries’ summary indicators are provided in Appendixes 5 to 9.

Appendix 1. Elementary Variables of Financial Development

Definition (Name) Source
Money supply / GDP (MTG) Line 35L (for money supply) and 99B (for GDP)
Deposit money bank assets / GDP (BATG) All categories of line 22 (for deposit money bank assets) and line 99B
Private credit by deposit money banks / GDP (PCTG) Line 32D (for private credit) and 99B
Stock market capitalization / GDP (SKTG) FSD
Stock market total value / GDP (SVTG) FSD

Appendix 2. Elementary Variables of Financial Crisis

Definition (Name) Source
Exchange rate (ER) ER = NER * (USCPI / SCPI) where NER is nominal exchange rate (line RF), and USCPI and SCPI are US and sample country’s consumer price indexes, respectively.
Money supply / foreign exchange MTF = NM / (FER * NER) where NM is nominal money supply (line 35L), and
reserve (MTF) FER is foreign exchange reserve (line 1D).
External debt (ED) § ED = (NED * NER) / CPI where NED is nominal external debt (WDI).
Trade volume (TV) TV = [(X + I) * NER] / CPI where X + I is exports + imports (lines 70 and 71).
Oil price (OP) OP = (NOP * NER) / CPI where NOP is nominal oil price (line 76AA).
Fiscal deficit (FCD) § FCD = NFCD / CPI where NFCD is nominal fiscal deficit (Reserve Bank of India)(for India).
Gov. consumption expenditure GCE = NGCE / CPI where NGCE is nominal government consumption
(GCE) § expenditure (line 91) (for Indonesia, Korea, Malaysia and Thailand).
Share price (SP) SP = NS / CPI where NSP is nominal share price (line 62).
Inflation rate (IR) IR = [(CPI – CPI) / CPI] * 100
Real interest rate (RR) RR = NR – IR where NR is nominal interest rate (discount rate) (line 60).
GDP (GDP) § GDP = NGDP / CPI where NGDP is nominal GDP (line 98B).
Money supply (MS) MS = NM / CPI
Total domestic deposit (TD) TD = NTD / CPI where NTD is the sum of demand- and time deposits (lines 24 and 25).
Deposit money bank assets (BA) BA = NBA / CPI where NBA is nominal bank assets (all categories of line 22).
Private credit by deposit money PC = NPC / CPI where NPC is nominal private credit (line 32D).
banks (PC)
Stock market capitalization / FSD
GDP (SKTGV) §
Stock market total FSD
value / GDP (SVTGV) §

Appendix 3. Asian Countries’ Selected Elementary Variables of Financial Crisis

Country Financial Crisis Variables
India ER; MTF; ED; TV; OP; FCD; SP; IR; GDP; MS; TD; SKTGV
Indonesia ER; MTF; ED; TV; OP;GCE; IR; MS; TD; BA; PC
Korea ER; MTF; TV;SP; IR; GDP; MS; TD; SKTGV; SVTGV
Malaysia ER; ED; TV; GCE; SP; IR; SKTGV
Thailand ER; MTF; ED; TV; GCE; IR; GDP; MS; TD; SKTGV

Appendix 4. Elementary Variables of Financial Repression

Definition (Name) Source
Nominal interest rate (NR) Line 60 (for bank rate)
Com. bank reserve / m. supply (CRTM) Lines 20 (for CB reserves) and 35L (for m. supply)
Com. bank reserve / GDP (CRTG) Lines 20 and 99B (for GDP)
Com. bank reserve / total deposit (CRTD) Lines 20 and 24 and 25 (for total deposit)
Claims on the gov. / m. supply (GTM) Lines 32AN (for claim on the government) and 35L
Claims on the gov. / GDP (GTG) Lines 32AN and 99B
Claims on the gov. / total domestic credit (GTD) Lines 32AN and 32 (for total domestic credit)
Inflation tax (Seigniorage) (IT) Change in reserve money (line 14) / GDP (line 99B)

Appendix 5. India’s EG and Summary Indicators

Appendix 5

Appendix 6. Indonesia’s EG and Summary Indicators

Appendix 6Appendix 6

Appendix 7. Korea’s EG and Summary Indicators

Appendix 7

Appendix 8. Malaysia’s EG and Summary Indicators

Appendix 8Appendix 8

Appendix 9. Thailand’s EG and Summary Indicators

Appendix 9