Financial Openness and Macroeconomic Variables' Impact on Multi-dimensional Financial Development in AHUMI countries

This study investigates the effects of institutional quality, trade liberalization, government expenditure, inflation, and economic growth on multi-dimensional financial development. For this aim to use the Panel Smooth Transition Regression (PSTR) model with financial openness as the transition variable. The statistical population comprises ۲۰ AHUMI economies from ۲۰۰۲ to ۲۰۲۱. The results confirm a nonlinear relationship among the variables with multi-dimensional financial development. Regime change occurs at a threshold value of ۱.۲۳۱. Ten countries fall into the first regime; and ten countries fall into the second regime. The speed of change from the first to the second regime is ۱.۷۵. In the first regime, institutional quality, trade liberalization, and government expenditure exert a significant positive effect on financial development, while inflation acts as an obstacle. Economic growth remains statistically insignificant. In the second regime, trade liberalization and government expenditure have a negative effect, and inflation's negative impact is severely amplified. Regarding institutional quality, while its overall effect remains positive, the interaction effect of financial openness and institutional quality moderates the impact of institution quality in both regimes. Policymakers should tailor their approaches to the level of financial openness; in the first regime, they should use expansionary policies (increasing government expenditure). In the second regime, they should prioritize fiscal discipline and inflation control to prevent capital flight. Finally, in economies with high financial openness, instead of imposing strict local regulations that create friction, the harmonization of national standards with international governance should be on the agenda to attract capital.

کلیدواژه ها:

Financial Development ، Financial Openness ، Institutional Quality ، multidimensional trade liberalization ، PSTR