Learning about the role of market micro-structure from high-frequency data on Asian banks

The role of banking and financial markets in facilitating regional development and growth is firmly embedded in economic theory, where the majority of arguments support the importance of financial markets in assisting and facilitating economic advance; see Levine (2005). At times, usually following a major regional crisis, there is discussion about the role of banking institutions and financial practices in precipitating crisis events, particularly focusing on poor governance, over-extended credit and reliance on potentially flighty international capital inflows. The discussions following the East Asian crisis of 1997-1998 provide good evidence of this perception in practice; see Fischer (2001) and Chang (2000). However, as Crafts and O'Rourke (2014) point out, other incidences such as the global financial crisis of 2008-2009 and the European problems after the Greek crisis of 2010 argue that financial crises can hit many different types of market at different stages of development. While emerg~ng markets may be more vulnerable to crises during the development of their financial markets-for example, the increased probability of crises in economies with less efficient structures; see Schaeck et al. (2009) and with exchange rates in transition between fixed and floating; see Fischer (2001)- the existing evidence confirms that strong growth opportunities are related to the availability and reliability of functioning banking and financial markets.