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Park, Cyn-Young
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ADB Economics Working Paper Series 285
Postcrisis policy responses tilted in favor of strengthening the global regulatory system and financial stability have limited the attention paid to the role of finance in supporting sustained economic growth and development. This has special implications for Asia which, despite being the new engine of growth to the world economy, continues to be challenged by the persistent gap between developments in its financial and real sectors. This paper examines how Asia's financial and economic landscapes have improved under the wave of regional macroeconomic and financial management reform, yet continue to be beset by highly bank-dominated local financial systems, financial infrastructures anemic in proper legal and regulatory frameworks, and shallow regional financial markets. The situation compromises Asia's ability to respond to the financial needs of its vast small and medium enterprise sector, infrastructure deficits, and poor households, constraining prospects for sustained high growth, development, and poverty reduction. The paper concludes that the financial development policy agenda in developing Asia should be focused on: (i) supporting economic growth and development, (ii) promoting financial inclusion, (iii) balancing regulation and innovation, and (iv) strengthening crisis prevention and management mechanisms.
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