Foreign Financial Services Adoption in Manufacturing by Asian Economies: New Index from the Global Value Chain Perspective

In this paper, we employ the input-output framework and recent global value chain (GVC) results to construct the index of foreign financial services adoption in manufacturing (FFSAM) that captures the role of foreign financial services in facilitating domestic manufacturing production. The FFSAM index shows that foreign financial services adoption by Asian economies has rapidly caught up with the Western world between 2007 and 2017. Asian economies tend to deploy more foreign financial services from high-income economies than low-income economies, and in high-technology manufacturing industries than low-technology manufacturing industries. Manufacturing industries that produce for domestic consumption and for exports tend to attract different groups of financial servicification providers. It is found that the FFSAM index is affected by the GVC position, financial institution factors, and financial market characteristics.