Determinants of a global financial center: An exploratory analysis

Well designed and comprehensive analyses of identifying determinants for a global financial center (GFC) are limited. This study is conducted to examine and identify the fundamental determinants for the Asia-Pacific region. Current literature provides us with 14 determinants which have been used in previous academic studies. The relevance and importance of these determinants for the Asia-Pacific region are unclear. We form 16,384 models on these 14 determinants to test the appropriateness of each of these determinants. Unlike previous studies, we use both Bayesian averaging of classical estimates (BACE) and the weighted average least square (WALS) in our analyses to ensure the robustness of the findings. Two key criteria are used to select relevant models with appropriate determinants. When all criteria and techniques are jointly considered, three fundamental determinants are identified for the Asia-Pacific region: (i) freedom to trade internationally; (ii) higher education and training; and (iii) market size.