Economic growth, development of telecommunications infrastructure, and financial development in Asia, 1991–2012

•We construct a development of telecommunications infrastructure (DTI) index.•We assess relationships between DTI, financial development, and economic growth.•We consider causal relationships for 21 Asian countries (1991–2012) in four regions.•We use a panel vector auto-regressive model to detect direction of causality.•We find Granger-causality among the variables, short-term and long-term, by region.

We use principal component analysis (PCA) to construct an index for the development of telecommunications infrastructure (DTI), and an index for financial development. We then assess the causal relationship among DTI, financial development, and economic growth in 21 Asian countries between 1991 and 2012. We study the Asian countries in four regional groups, and use a panel vector auto-regressive (VAR) model to detect the direction of causality among the three variables. Our results reveal that there is Granger-causality among the variables, both in the short run and in the long run, although the exact nature of the results varies by region in Asia.

Graphical abstractProposed model and Graphical abstract.Note 1: CIF: Composite index of financial development; and CII: Composite index of development of telecommunications infrastructure (DTI).Note 2: Hypotheses H1A-H3B are discussed in Sub-section 2.3.Figure optionsDownload full-size imageDownload as PowerPoint slide