Asian Journal of Research in Business Economics and Management

This paper makes an empirical attempt to examine the interrelationship between the financial structure and the macroeconomic performance for selected Asian countries. This paper uses two-stage Principal Component Analysis to examine correlation between measures of performance of the financial system and indicators of macroeconomic performance. The paper shows that there exists positive co-movement between bank and stock market. Moreover, one can think of a composite entity called financial structure standing in conditioning-conditioned relationship with the real sector. This has strong implications for policy perspectives from the point of view of a nation.