THE NEXUS BETWEEN FINANCIAL STABILITY AND ECONOMIC GROWTH IN SOUTHEAST ASIA

Abstrak

Financial stability is an important part of economic growth. The main objective in this
study is to analyze how financial stability (using Bank Z-Score) affects economic growth.
The data used is country-level data from five selected countries in the Southeast Asia
region (Indonesia, Cambodia, Malaysia, Philippines, and Thailand) for the period 2011 –
2021 using the ARDL model approach. The results of this study found strong evidence that
financial stability (banking stability) has a positive effect on economic growth for countries
in the Southeast Asian region. This study also reveals that it is not only financial stability
variables that are important to achieve economic growth but investment and trade openness
must also be increased if the country want to achieve the expected economic growth. The
positive relationship between investment and trade openness implies that investment and
trade openness can be beneficial to economic growth.