The Contribution of Financial Institutions to Thai Economic Development
Aphimeteetamrong, Virach
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Permalink
https://hdl.handle.net/2142/68368
Description
Title
The Contribution of Financial Institutions to Thai Economic Development
Author(s)
Aphimeteetamrong, Virach
Issue Date
1980
Department of Study
Finance
Discipline
Finance
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Finance
Language
eng
Abstract
Financial markets development is conceptually recognized as an important factor in economic development. The development of financial institutions and markets is part of the economic development process, and it is assumed that such financial growth will contribute to real economic growth. Four main issues exist with regard to the importance of financial markets in economic development: (1) Their impact on the mobilization of household savings. (2) Their role in the financialization of these savings. (3) Their role in the allocation of these savings into real capital investments. (4) Their impact on the distribution of income, wealth and economic power.
This study is a case study of the relationship between the development of financial markets and institutions and the economic development of Thailand during the period of 1962-1977. The evolution of the overall financial structure of Thailand as well as a comparative analysis of the role and impact of each category of financial institutions are presented. The relationship between financial development and economic growth is investigated by using correlation analysis and measuring the relative importance of financial institutions. The importance of financial institutions is measured by the ratios of financial variables to GDP (Gross Domestic Product) or per capita GDP, the distribution of credits extended to different sectors, and the distribution of credits and deposits classified by geographical areas. This study is limited only to the "organized" sector of the financial system.
The results indicate the following: (1) Commercial banks are by far the largest and the most important financial institution in terms of total assets, the mobilization of financial savings and the provision of credits. Finance companies are the second largest and the most dynamic financial institution. (2) Financial institutions had a strong influence in mobilizing financial savings from the public and played a significant role in encouraging household savers to hold financial assets instead of physical assets. In addition, the organized financial market expanded along with the growth of economy. (3) Financial institutions, especially commercial banks, had a tendency to allocate more funds to international and domestic trade rather than manufacturing and agricultural sectors. (4) Commercial banks contributed to the overall economic growth rather than balanced growth among sectors. (5) Commercial banks had a relatively minor role in the development of rural areas and in reducing socioeconomic disparities. (6) The development of financial markets or financial institutions by the private sector has been fully supported by the government, and all of them are increasingly regulated and supervised by the government.
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