Navigating Financial Reforms: Threshold Effects and Multidimensional Development in Asia's Vulnerable Economies

Navigating Financial Reforms: Threshold Effects and Multidimensional Development in Asia's Vulnerable Economies | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Navigating Financial Reforms: Threshold Effects and Multidimensional Development in Asia's Vulnerable Economies Salim Hamid Hayis, Kiumars Shahbazi This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8925357/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract Financial openness is a key driver of financial development, capable of amplifying or dampening the influence of other determinants of financial development. Therefore, this paper examines the role of financial openness in influencing macroeconomic and institutional factors on multidimensional financial development in low and lower-middle-income Asian economies during 2001–2021. To achieve this goal, a panel smooth transition regression (PSTR) model is used. The transition variable is the Chinn-Ito index, which indicates financial openness. The estimation results show a threshold value of 0.3567 for the Chinn-Ito index. When the Chinn-Ito index value is less than this value, it indicates the first regime, and values higher than it indicate the second regime. The results show that in the first regime, institutional quality, GDP growth and fiscal policy have a positive effect on financial development. In contrast, in the second regime, both institutional quality and GDP growth are negatively associated with financial development, and the positive role of fiscal policy weakens. Trade openness remains positively and significantly linked to financial development in both regimes, but its amount is larger in the second regime. The results indicate that strong domestic institutions, GDP growth, and fiscal policies foster various dimensions of sustainable financial development only when there is financial openness below the threshold in these countries. JEL Classifications : G20, O16, F43, C23, E44 Financial openness multidimensional Financial Development Institutional governance Trade liberalization PSTR Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8925357","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":597662606,"identity":"e1883ae2-b496-4f85-9aa3-21b3ea40452e","order_by":0,"name":"Salim Hamid Hayis","email":"data:image/png;base64,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","orcid":"","institution":"","correspondingAuthor":true,"prefix":"","firstName":"Salim","middleName":"Hamid","lastName":"Hayis","suffix":""},{"id":597662607,"identity":"a304834f-13d8-4ff6-8c84-7005b7c8c8ba","order_by":1,"name":"Kiumars Shahbazi","email":"","orcid":"","institution":"","correspondingAuthor":false,"prefix":"","firstName":"Kiumars","middleName":"","lastName":"Shahbazi","suffix":""}],"badges":[],"createdAt":"2026-02-20 11:24:26","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-8925357/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-8925357/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":104400758,"identity":"28444c22-49b0-4b56-b535-0ce3f9731bcd","added_by":"auto","created_at":"2026-03-11 12:10:56","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":634577,"visible":true,"origin":"","legend":"","description":"","filename":"PAPER2.pdf","url":"https://assets-eu.researchsquare.com/files/rs-8925357/v1_covered_6e2c4c1a-9ef5-4c00-b8db-f876260456ac.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Navigating Financial Reforms: Threshold Effects and Multidimensional Development in Asia's Vulnerable Economies","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Financial openness, multidimensional Financial Development, Institutional governance, Trade liberalization, PSTR","lastPublishedDoi":"10.21203/rs.3.rs-8925357/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-8925357/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eFinancial openness is a key driver of financial development, capable of amplifying or dampening the influence of other determinants of financial development. 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