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Độ mở kinh tế, phát triển tài chính, tăng trưởng kinh tế và chất lượng môi trường Bằng chứng từ các nước đang phát triển.Độ mở kinh tế, phát triển tài chính, tăng trưởng kinh tế và chất lượng môi trường Bằng chứng từ các nước đang phát triển.Độ mở kinh tế, phát triển tài chính, tăng trưởng kinh tế và chất lượng môi trường Bằng chứng từ các nước đang phát triển.Độ mở kinh tế, phát triển tài chính, tăng trưởng kinh tế và chất lượng môi trường Bằng chứng từ các nước đang phát triển.Độ mở kinh tế, phát triển tài chính, tăng trưởng kinh tế và chất lượng môi trường Bằng chứng từ các nước đang phát triển.Độ mở kinh tế, phát triển tài chính, tăng trưởng kinh tế và chất lượng môi trường Bằng chứng từ các nước đang phát triển.Độ mở kinh tế, phát triển tài chính, tăng trưởng kinh tế và chất lượng môi trường Bằng chứng từ các nước đang phát triển.Độ mở kinh tế, phát triển tài chính, tăng trưởng kinh tế và chất lượng môi trường Bằng chứng từ các nước đang phát triển.Độ mở kinh tế, phát triển tài chính, tăng trưởng kinh tế và chất lượng môi trường Bằng chứng từ các nước đang phát triển.Độ mở kinh tế, phát triển tài chính, tăng trưởng kinh tế và chất lượng môi trường Bằng chứng từ các nước đang phát triển.Độ mở kinh tế, phát triển tài chính, tăng trưởng kinh tế và chất lượng môi trường Bằng chứng từ các nước đang phát triển.
MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY - Pham Thi Thuy Diem OPENNESS, FINANCIAL DEVELOPMENT, ECONOMIC GROWTH, AND ENVIRONMENTAL QUALITY: EVIDENCE FROM DEVELOPING COUNTRIES DOCTOR OF PHILOSOPHY THESIS IN ECONOMICS Ho Chi Minh City, 2022 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY - Pham Thi Thuy Diem OPENNESS, FINANCIAL DEVELOPMENT, ECONOMIC GROWTH, AND ENVIRONMENTAL QUALITY: EVIDENCE FROM DEVELOPING COUNTRIES Major: Development Economics Code: 9310105 ACADEMIC ADVISOR: Prof Dr Nguyen Trong Hoai Ho Chi Minh City, 2022 iii COMMITMENTS I declare that the thesis has been composed by myself and that the thesis has not been submitted for any other degree or professional qualification I confirm that the thesis submitted is my own, except where thesis which has formed part of jointly authored publications has been included My contribution and those of the other authors to this thesis have been explicitly indicated below I confirm that appropriate credit has been given within this thesis where reference has been made to the work of others Some works demonstrated in Chapter 1, Chapter 2, Chapter 3, Chapter 4, and Chapter were previously published in an international journal, Cogent Economics & Finance, 9(1) as “Impacts of openness on financial development in developing countries: Using a Bayesian model averaging approach” by Pham Thi Thuy Diem (the first and corresponding author) & Nguyen Trong Hoai (co-author) (2021) The rest of works demonstrated in Chapter 1, Chapter 2, Chapter 3, Chapter 4, and Chapter can be combined into two papers for further publications The work presented in Chapter was previously published in three national publications including: (i) Tạp chí Phát triển & Hội Nhập, 55(65), 109-116 as “Financial development and economic growth: A review of the literature” by Pham Thi Thuy Diem (the first and corresponding author) & Nguyen Trong Hoai (coauthor) (2020); (ii) Tạp chí Cơng Thương, Số 1-Tháng 1/2021, 72-80 as “Trade openness and environmental quality: A review of the literature” by Pham Thi Thuy Diem (the first and corresponding author) & Nguyen Trong Hoai (co-author) (2021); (iii) Review of Finance, 4(1), 9-12 as “Impacts of openness on financial development: A review of the literature” by Pham Thi Thuy Diem (the first and corresponding author) & Nguyen Trong Hoai (co-author) (2021) The thesis has been done under the supervision of Professor Nguyen Trong Hoai, the University of Economics Ho Chi Minh City Pham Thi Thuy Diem 10 July 2022 TABLE OF CONTENTS COVER PAGE COMMITMENTS TABLE OF CONTENTS ABBREVIATIONS LIST OF TABLES LIST OF FIGURES ABSTRACT CHAPTER - INTRODUCTION 1.1 Research problems 1.1.1 The impacts of openness on financial development 1.1.2 The impact of financial development on economic growth 1.1.3 The impact of trade openness on environmental quality 1.2 Research objectives 11 1.3 Research contributions 13 1.4 Structure of the thesis 14 CHAPTER - LITERATURE REVIEW 16 2.1 Openness and financial development 16 2.1.1 Impacts of openness on financial development: A theoretical review 16 2.1.2 Impacts of openness on financial development: An empirical review 21 2.1.3 Impacts of openness on financial development: Research hypotheses and a conceptual framework……………………………………………………………… 30 2.2 Financial development and economic growth 32 2.2.1 Impact of financial development on economic growth: A theoretical review 32 2.2.2 Impact of financial development on economic growth: An empirical review 35 2.2.3 Impact of financial development on economic growth: Research hypothesis and a conceptual framework 42 2.3 Trade openness and environmental quality 45 2.3.1 Impact of trade openness on environmental quality: A theoretical review 45 2.3.2 Impact of trade openness on environmental quality: An empirical review 49 2.3.3 Impact of trade openness on environmental quality: Research hypothesis and a conceptual framework 55 2.2 An integrated conceptual framework for the links between openness, financial development, economic growth, and environmental quality in developing countries 58 CHAPTER - RESEARCH METHODOLOGY 60 3.1 Methodology 60 3.1.1 The issue of model uncertainty 60 3.1.2 Bayesian model averaging methodology and model uncertainty 60 3.2 Construction of variables 66 3.2.1 Openness, financial development, economic growth, and environmental quality…… 66 3.2.2 Controlled variables 69 3.3 Data sources 99 CHAPTER - OPENNESS, FINANCIAL DEVELOPMENT, ECONOMIC GROWTH AND ENVIRONMENTAL QUALITY - EVIDENCE FROM DEVELOPING COUNTRIES 102 4.1 The impacts of openness on financial development: Evidence from developing countries 102 4.1.1 Descriptive statistics results 102 4.1.2 Estimation results and discussions 107 4.2 The impact of financial development on economic growth: Evidence from developing countries 115 4.2.1 Descriptive statistics results 115 4.2.2 Estimation results and discussions 120 4.3 The impact of trade openness on environmental quality: Evidence from developing countries 126 4.3.1 Descriptive statistics results 126 4.3.2 Estimation results and discussions 131 CHAPTER - CONCLUSIONS 140 5.1 Main findings 140 5.1.1 The impacts of openness on financial development: Evidence from developing countries………………………………………………………………………… 140 5.1.2 The impact of financial development on economic growth: Evidence from developing countries 141 5.1.3 The impact of trade openness on environmental quality: Evidence from developing countries 143 5.2 Policy implications 144 5.3 Overall conclusions, limitations, and further research of the thesis 148 5.3.1 Overall conclusions 148 5.3.2 Contributions 149 5.3.3 Limitations and further research 151 REFERENCE 154 APPENDICES 181 ABBREVIATIONS AREAER Annual report on Exchange Arrangements and Exchange Restrictions BMA Bayesian model averaging BRIC Benchmark prior CO2 Carbon dioxide EG Economic growth FD Financial development FDI Foreign direct investment FO Financial openness GDP Gross Domestic Product GFDD Global Financial Development Database IEA International Energy Agency KAOPEN Capital account openness index LEB Local empirical Bayes approach PWT Penn World Table SO2 Sulfur dioxide TradeOpen Trade openness UIP Unit Information Prior UNCTAD United Nations Conference on Trade and Development WDI World Development Indicators WGI Worldwide Governance Indicators LIST OF TABLES Table 3.1 Information on variables for Objective 72 Table 3.2 Information on variables for Objective 81 Table 3.3 Information on variables for Objective 92 Table 3.4 The list of developing countries 100 Table 4.1 Summary statistics of the variables for Objective 1, whole sample, 64 economies, 2003-2017 Table 4.2 Correlations between of the variables for Objective 1, whole sample, 2003-2017 Table 4.3 The impacts of openness on financial development: posterior estimates under uniform model priors Table 4.4 Summary statistics of the variables for Objective 2, whole sample, 64 economies, 2003-2017 Table 4.5 Correlations between of the variables for Objective 2, whole sample, 2003-2017 Table 4.6 The impacts of financial development on economic growth: posterior estimates under uniform model priors Table 4.7 Summary statistics of the variables for Objective 3, whole sample, 64 economies, 2003-2017 Table 4.8 Correlations between of the variables for Objective 3, whole sample, 2003-2017 Table 4.9 The impacts of trade openness on environmental quality: posterior estimates under uniform model priors 104 105 109 117 118 122 126 130 133 LIST OF FIGURES Figure 1.1 Financial development in developing countries over the period 2003-2017 Figure 1.2 Openness in developing countries over the period 2003-2017 Figure 1.3 Economic growth in developing countries over the period 20032017 Figure 1.4 Environmental quality in developing countries over the period 2003-2017 10 Figure 2.1 The McKinnon–Shaw model 16 Figure 2.2 A theoretical approach to openness and financial development 21 Figure 2.3 A conceptual framework for the impacts of openness on financial development Figure 2.4 A theoretical approach to financial development and economic growth Figure 2.5 A conceptual framework for the impact of financial development on economic growth Figure 2.6 A theoretical approach to trade openness and environmental quality Figure 2.7 A conceptual framework for the impact of trade openness on environmental quality 31 35 44 47 57 Figure 2.8 An integrated conceptual framework for three objectives 59 Figure 3.1 Legal origins of developing countries 101 Figure 4.1 Scatter plots of openness and financial development in developing countries, 2003 – 2017 Figure 4.2 Marginal densities of trade openness, financial openness, and the interaction between trade openness and financial openness from BRIC Figure 4.3 Cumulative model probabilities from BRIC for Object Figure 4.4 Scatter plots of financial development and economic growth in developing countries, 2003 - 2017 106 111 114 119 Figure 4.5 Marginal densities of financial development from BRIC 124 Figure 4.6 Cumulative model probabilities from BRIC for Object 121 Figure 4.7 Scatter plots of trade openness and environmental quality in developing countries, 2003 – 2017 131 Figure 4.8 Marginal densities of openness from BRIC 135 Figure 4.9 Cumulative model probabilities from BRIC for Object 136 ABSTRACT Motivated by trade and financial liberalisation policies have become increasingly important in developing countries over the past two decades and the existing gaps in the literature regarding financial development, economic growth, and environmental quality research need to be addressed Therefore, this thesis aims to provide new evidence on the impacts of trade and financial openness on financial development, the impact of financial development on economic growth, and the impact of trade openness on environmental quality in 64 developing countries over the period 2003-2017 One major contribution of this thesis for three objectives is the adoption of the regression model based on Bayesian model averaging approach to consider model uncertainty (Raftery et al., 1997; Hoeting et, al., 1999; Chipman et al., 2001; Fragoso et al., 2018) Regarding the impacts of openness on financial development, the thesis demonstrates that the contribution of trade openness to financial development is important in developing economies with better institutions However, financial openness has an insignificant positive effect on financial development There is no evidence to support the Rajan and Zingales hypothesis that the simultaneous openness to both trade and capital flows promotes financial development The findings also indicate that a better institutions environment allows a developing economy to exploit the benefits of openness to financial development Regarding the impact of financial development on economic growth, the main findings indicate that financial development has a significant U-shaped effect on economic growth, providing new insight concerning the relationship between financial development and economic growth in developing countries The results also demonstrate that investment to gross domestic product ratio and foreign direct investment have significant positive effects on economic growth, whereas population growth has a significant negative impact on economic growth Appendix 4.6 Impacts of trade openness on environmental quality > mfls2 = bms(datafls, burn=1e7, iter=2e7, g="BRIC", mprior="uniform", nmodel=5000, mcmc="bd") KAOPEN legor_so Africa LatCar lnKLa.lnIncome lnFDI.K LnREnergyUse TimeTrend lnTradeOpen.lnREL.KL.lnREL.INC LagIncome lnTradeOpen.lnREL.KLa2 lnTradeOpen.lnREL.KLa lnKLa2 lnKLa legor_uk lnIncome2 lnTradeOpen.lnREL.INC2 lnTradeOpen.lnREL.INC lnEcoIntensity lnEcoIntensity2 lnTradeOpen Mean no regressors "12.5853" % Topmodels "100" Draws "2e+07" Corr PMP "0,9999" PIP 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 0.997 0.535 0.527 0.521 0.507 0.249 0.077 0.036 0.035 0.034 0.034 0.033 Post SD Cond.Pos.Sign 0.011 0.000 0.066 1.000 0.037 0.000 0.046 0.000 0.009 0.000 0.016 1.000 0.008 0.000 0.003 0.000 0.008 0.000 0.065 1.000 85.169 0.000 170.339 0.119 44.628 1.000 89.256 0.944 0.032 0.000 0.030 0.037 19.101 0.978 38.201 0.884 31.582 1.000 15.791 0.940 0.008 0.016 No Burnins Time models visited "1e+07" "40.49832 mins" "1944719" No Model Prior g-Prior Obs "960" "uniform / 10,5" "BRIC" Time difference of 40.49832 mins > coef(mfls2 exact=TRUE) Post Mean -0.081 0.600 -0.349 -0.314 -0.112 0.102 -0.118 -0.052 -0.048 0.311 -18.881 37.575 5.923 -10.606 -0.016 -0.006 0.928 -1.855 1.066 -0.533 0.000 Idx 2.000 4.000 5.000 6.000 13.000 19.000 20.000 21.000 18.000 11.000 15.000 14.000 10.000 9.000 3.000 12.000 17.000 16.000 7.000 8.000 1.000 Modelspace 2^K % visited "2097152" ShrinkageStats "Av=0,999" "93" KAOPEN legor_so Africa LatCar lnKLa.lnIncome lnFDI.K LnREnergyUse TimeTrend lnTradeOpen.lnREL.KL.lnREL.INC LagIncome lnTradeOpen.lnREL.KLa2 lnTradeOpen.lnREL.KLa lnKLa2 lnKLa legor_uk lnIncome2 lnTradeOpen.lnREL.INC2 lnTradeOpen.lnREL.INC lnEcoIntensity PIP 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 0.997 0.531 0.531 0.515 0.513 0.249 0.076 0.035 0.035 0.034 Post Mean -0.081 0.600 -0.349 -0.314 -0.112 0.102 -0.118 -0.052 -0.048 0.311 -18.930 37.674 5.905 -10.571 -0.016 -0.006 0.935 -1.870 1.045 Post SD Cond.Pos.Sign Idx 0.011 0.000 2.000 0.066 1.000 4.000 0.037 0.000 5.000 0.046 0.000 6.000 0.009 0.000 13.000 0.016 1.000 19.000 0.008 0.000 20.000 0.003 0.000 21.000 0.008 0.000 18.000 0.065 1.000 11.000 85.276 0.000 15.000 170.553 0.119 14.000 44.574 1.000 10.000 89.148 0.944 9.000 0.032 0.000 3.000 0.030 0.037 12.000 19.180 0.978 17.000 38.359 0.883 16.000 31.280 1.000 7.000 > cor(pmp.bma(mfls2)) PMP PMP (Exact) PMP (MCMC) > mfls2 (Exact) PMP 0.9998818 (MCMC) 0.9998818 = bms(datafls burn=1e7 iter=2e7 g="UIP" mprior="uniform" nmodel=5000 mcmc="bd") KAOPEN legor_so Africa LatCar lnKLa.lnIncome lnFDI.K LnREnergyUse TimeTrend lnTradeOpen.lnREL.KL.lnREL.INC PIP 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Post Mean -0.081 0.600 -0.349 -0.314 -0.112 0.102 -0.118 -0.052 -0.048 Post SD Cond.Pos.Sign 0.011 0.000 0.066 1.000 0.037 0.000 0.046 0.000 0.009 0.000 0.016 1.000 0.008 0.000 0.003 0.000 0.008 0.000 Idx 2.000 4.000 5.000 6.000 13.000 19.000 20.000 21.000 18.000 LagIncome lnTradeOpen.lnREL.KLa2 lnTradeOpen.lnREL.KLa lnKLa2 lnKLa legor_uk lnIncome2 lnTradeOpen.lnREL.INC2 lnTradeOpen.lnREL.INC lnEcoIntensity2 lnEcoIntensity lnTradeOpen Mean no regressors "12.5857" % Topmodels "100" Draws "2e+07" Corr PMP "1.0000" 0.997 0.534 0.528 0.517 0.511 0.249 0.077 0.035 0.035 0.034 0.034 0.033 0.311 -19.010 37.833 5.898 -10.558 -0.016 -0.006 0.918 -1.836 -0.527 1.054 0.000 0.065 85.448 170.896 44.543 89.085 0.032 0.030 19.005 38.010 15.709 31.418 0.008 No Burnins Time models visited "1e+07" "48.59866 mins" "1947223" No Model Prior g-Prior Obs "960" "uniform / 10,5" "UIP" 1.000 0.000 0.120 1.000 0.944 0.000 0.038 0.979 0.883 0.942 1.000 0.016 11.000 15.000 14.000 10.000 9.000 3.000 12.000 17.000 16.000 8.000 7.000 1.000 Modelspace 2^K % visited "2097152" ShrinkageStats "Av=0.999" "93" Time difference of 48.59866 mins > coef(mfls2 exact=TRUE) KAOPEN legor_so Africa LatCar lnKLa.lnIncome lnFDI.K LnREnergyUse TimeTrend lnTradeOpen.lnREL.KL.lnREL.INC LagIncome lnTradeOpen.lnREL.KLa2 lnTradeOpen.lnREL.KLa lnKLa2 lnKLa legor_uk lnIncome2 PIP 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 0.997 0.531 0.531 0.515 0.513 0.249 0.076 Post Mean -0.081 0.600 -0.349 -0.314 -0.112 0.102 -0.118 -0.052 -0.048 0.311 -18.929 37.672 5.904 -10.569 -0.016 -0.006 Post SD Cond.Pos.Sign 0.011 0.000 0.066 1.000 0.037 0.000 0.046 0.000 0.009 0.000 0.016 1.000 0.008 0.000 0.003 0.000 0.008 0.000 0.065 1.000 85.275 0.000 170.550 0.119 44.570 1.000 89.139 0.944 0.032 0.000 0.030 0.037 Idx 2.000 4.000 5.000 6.000 13.000 19.000 20.000 21.000 18.000 11.000 15.000 14.000 10.000 9.000 3.000 12.000 lnTradeOpen.lnREL.INC2 lnTradeOpen.lnREL.INC lnEcoIntensity lnEcoIntensity2 lnTradeOpen 0.035 0.035 0.034 0.034 0.033 0.935 -1.870 1.045 -0.522 0.000 19.177 38.354 31.278 15.639 0.008 0.978 0.883 1.000 0.942 0.016 17.000 16.000 7.000 8.000 1.000 > cor(pmp.bma(mfls2)) PMP PMP (Exact) PMP (MCMC) > mfls2 (Exact) PMP 0.9999529 (MCMC) 0.9999529 = bms(datafls burn=1e7 iter=2e7 g="EBL" mprior="uniform" nmodel=5000 mcmc="bd") KAOPEN legor_so Africa LatCar lnKLa.lnIncome lnFDI.K LnREnergyUse TimeTrend lnTradeOpen.lnREL.KL.lnREL.INC LagIncome lnTradeOpen.lnREL.KLa2 lnTradeOpen.lnREL.KLa lnKLa2 lnKLa legor_uk lnIncome2 lnTradeOpen.lnREL.INC2 lnTradeOpen.lnREL.INC lnEcoIntensity lnEcoIntensity2 lnTradeOpen PIP 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 0.997 0.533 0.527 0.514 0.513 0.242 0.074 0.034 0.034 0.033 0.033 0.032 Post Mean -0.082 0.600 -0.349 -0.314 -0.112 0.102 -0.118 -0.052 -0.048 0.311 -18.421 36.656 5.729 -10.218 -0.016 -0.006 0.921 -1.841 1.045 -0.522 0.000 Post SD Cond.Pos.Sign 0.011 0.000 0.066 1.000 0.037 0.000 0.046 0.000 0.009 0.000 0.016 1.000 0.008 0.000 0.003 0.000 0.008 0.000 0.065 1.000 84.171 0.000 168.343 0.116 43.875 1.000 87.750 0.946 0.032 0.000 0.029 0.037 19.035 0.977 38.070 0.881 31.284 1.000 15.642 0.940 0.008 0.017 Idx 2.000 4.000 5.000 6.000 13.000 19.000 20.000 21.000 18.000 11.000 15.000 14.000 10.000 9.000 3.000 12.000 17.000 16.000 7.000 8.000 1.000 Mean no regressors "12.5674" % Topmodels "100" Draws Burnins Time "2e+07" Corr PMP "1.0000" "1e+07" No Obs "960" "1.40857 hours" No models visited "1890488" Model Prior g-Prior "uniform / 10,5" "EBL" Modelspace 2^K % visited "2097152" ShrinkageStats "Av=0.9991" "90" Time difference of 1.40857 hours > coef(mfls2 exact=TRUE) KAOPEN legor_so Africa LatCar lnKLa.lnIncome lnFDI.K LnREnergyUse TimeTrend lnTradeOpen.lnREL.KL.lnREL.INC LagIncome lnTradeOpen.lnREL.KLa2 lnTradeOpen.lnREL.KLa lnKLa2 lnKLa legor_uk lnIncome2 lnTradeOpen.lnREL.INC2 lnTradeOpen.lnREL.INC lnEcoIntensity2 lnEcoIntensity lnTradeOpen PIP Post Mean 1.000 -0.082 1.000 0.600 1.000 -0.349 1.000 -0.314 1.000 -0.112 1.000 0.102 1.000 -0.118 1.000 -0.052 1.000 -0.048 0.997 0.311 0.530 -18.396 0.530 36.605 0.515 5.745 0.513 -10.251 0.242 -0.016 0.074 -0.006 0.034 0.914 0.034 -1.827 0.033 -0.510 0.033 1.020 0.032 0.000 > cor(pmp.bma(mfls2)) PMP PMP (Exact) PMP (MCMC) (Exact) PMP 0.9999782 (MCMC) 0.9999782 Post SD Cond.Pos.Sign 0.011 0.000 0.066 1.000 0.037 0.000 0.046 0.000 0.009 0.000 0.016 1.000 0.008 0.000 0.003 0.000 0.008 0.000 0.065 1.000 84.116 0.000 168.233 0.116 43.938 1.000 87.876 0.946 0.032 0.000 0.029 0.038 18.961 0.977 37.922 0.882 15.454 0.941 30.908 1.000 0.008 0.016 Idx 2.000 4.000 5.000 6.000 13.000 19.000 20.000 21.000 18.000 11.000 15.000 14.000 10.000 9.000 3.000 12.000 17.000 16.000 8.000 7.000 1.000 Figure 4.6a Posterior model size distribution from BRIC for Objective Source: Author’s analysis Figure 4.6b Posterior model probabilities from BRIC for Objective Source: Author’s analysis Figure 4.6c Posterior model size distribution from UIP for Objective Source: Author’s analysis Figure 4.6d Posterior model probabilities from UIP for Objective Source: Author’s analysis Figure 4.6e Posterior model size distribution from EBL for Objective Source: Author’s analysis Figure 4.6f Posterior model probabilities from EBL for Objective Source: Author’s analysis Figure 4.6g Cumulative model probabilities from UIP for Objective Source: Author’s analysis Figure 4.6h Cumulative model probabilities from EBL for Objective Source: Author’s analysis Figure 4.6k Marginal densities of trade openness from UIP Source: Author’s analysis Figure 4.6i Marginal densities of trade openness from EBL Source: Author’s analysis ... presented in Chapter was previously published in three national publications including: (i) Tạp chí Phát triển & Hội Nhập, 55(65), 109-116 as “Financial development and economic growth: A review of