Financial Development, Globalization, and Economic Growth in The Next-11 Countries: Evidence from a Panel ARDL Model
Abstract
Given the growing importance of financial development and globalization in shaping economic growth over recent decades, particularly in the context of the Next-11 countries, policymakers need to carefully assess both the individual and joint effects of these factors to design policies that maximize their growth-enhancing potential. Accordingly, this study investigates the short-run and long-run effects of financial development and globalization—both independently and interactively—on economic growth in the Next-11 countries over the period 1990–2023, employing a panel ARDL framework. The empirical results reveal that financial development and globalization each have negative and significant effects on economic growth in both the short and long run. However, the interaction term between financial development and globalization is positive and significant across both time horizons, providing strong support for the complementarity hypothesis. This finding suggests that, although each factor individually constrains growth, their joint effect mitigates these adverse impacts and ultimately enhances growth outcomes. With respect to the control variables, labor has a positive and significant impact on economic growth in both the short run and the long run, highlighting the critical role of human capital and labor force expansion. Physical capital is found to be insignificant in the long run but exhibits mixed effects in the short run. Inflation remains insignificant in the long run but shows a small yet positive and significant effect in the short run. Overall, these results offer important policy implications, emphasizing the need for coordinated financial and external-sector policies to promote sustainable economic growth in the Next-11 countries.
- Panel ARDL examines finance–globalization–growth links in Next-11 economies.
- Financial development and globalization show conditional long-run effects.
- Their interaction supports complementarity in explaining GDP per capita.
- Threshold analysis clarifies when marginal effects become favorable.
- FMOLS and CCR checks broadly support the baseline ARDL findings.
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https://doi.org/10.36923/ie-frontiers.v29i1.427
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