ABSTRACT
Since the 1980s and particularly since the 1990s, many emerging economies in Asia have undertaken significant efforts to liberalize and expand the scope and depth of their financial systems, though there is great heterogeneity across countries with regard to the timing of the reforms. The literature suggests several reasons for doing so. Financial development has long been linked to faster growth and greater welfare (King and Levine 1993a, 1993b; Levine and Zervos 1996; Levine 1997, 2005; Luintel and Khan 1999; Eichengreen 2013). Increased access to financing has beneficial effects, especially for historically underserved segments, such as small and medium enterprises (Beck and Demirgüç-Kunt 2006; Beck et al. 2011; de la Torre et al. 2010). A deep financial system has usually been perceived as more resilient to shocks and less prone to volatility and financial crises (Acemoglu and Zilibotti 1997; Aghion et al. 1999; Easterly et al. 2000), although in some other instances it has also been linked to crises. These reform efforts have involved, among other things, improving access to banks (for savings, credit and financial transactions in general) and developing capital markets as an alternative and competitor to the bank model, which is usually viewed as more costly.
