Institutional Capacity and Strategic Policy Design in Building Financial Hubs in Emerging Economies

Abstract :

The success of global financial centres increasingly hinges not only on favorable economic and geographic conditions but also on the strength, transparency, and adaptability of their governance frameworks. As many developing economies strive to establish themselves as competitive global financial hubs, this study provides empirical insights to guide strategic policymaking in such contexts. Utilizing Propensity Score Matching (PSM), the research investigates the relationship between national characteristics and Global Financial Centres Index (GFCI) ratings. The findings underscore the pivotal role of governance quality, with variables such as government effectiveness, political stability, and voice and accountability positively influencing GFCI performance. Additional contributors include foreign direct investment (FDI), population growth, air cargo capacity, and commercial bank density. In contrast, overly stringent regulatory quality and high levels of perceived corruption are negatively correlated with GFCI scores, highlighting the need for balanced regulatory efficiency. These measures are critical for many developing economies to enhance their competitiveness and resilience in the global financial system. Robustness checks through sensitivity analysis confirm the stability and validity of the findings, even in the presence of potential hidden biases.