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Article

Helpless Rich Data: The Effect of Financial Openness with Dimensionality Reduction

by
H. E. Cha
1,*,
Doo Kyun Wang
2 and
Sherryl Berg-Ridenour
1
1
Fred Hale School of Business, East Texas Baptist University, One Tiger Drive, Marshall, TX 75670, USA
2
Department of Social Science, Korean Minjok Leadership Academy, 800 Bonghwa-ro, Anheung-myeon, Hoengseong-gun 25268, Gangwon-do, Republic of Korea
*
Author to whom correspondence should be addressed.
Economies 2025, 13(3), 62; https://doi.org/10.3390/economies13030062
Submission received: 25 December 2024 / Revised: 4 February 2025 / Accepted: 5 February 2025 / Published: 24 February 2025
(This article belongs to the Special Issue Studies on Factors Affecting Economic Growth)

Abstract

The literature on financial openness is rich, yet the selection of a suitable financial index remains a challenge. In this paper, Principal Component Analysis (PCA) and Factor Analysis (FA) are utilized to reduce the dimensionality of five publicly available financial openness indices. The results of the estimation are unexpected: PCA suggests a negative impact of financial openness on economic growth, while FA yields inconsistent results. Importantly, the negative impact of the institutional component on economic growth is statistically significant. These findings highlight the urgent need for proper institutional readiness to fully realize the benefits of financial openness.
Keywords: financial openness; economic development; principal component analysis; factor analysis financial openness; economic development; principal component analysis; factor analysis

Share and Cite

MDPI and ACS Style

Cha, H.E.; Wang, D.K.; Berg-Ridenour, S. Helpless Rich Data: The Effect of Financial Openness with Dimensionality Reduction. Economies 2025, 13, 62. https://doi.org/10.3390/economies13030062

AMA Style

Cha HE, Wang DK, Berg-Ridenour S. Helpless Rich Data: The Effect of Financial Openness with Dimensionality Reduction. Economies. 2025; 13(3):62. https://doi.org/10.3390/economies13030062

Chicago/Turabian Style

Cha, H. E., Doo Kyun Wang, and Sherryl Berg-Ridenour. 2025. "Helpless Rich Data: The Effect of Financial Openness with Dimensionality Reduction" Economies 13, no. 3: 62. https://doi.org/10.3390/economies13030062

APA Style

Cha, H. E., Wang, D. K., & Berg-Ridenour, S. (2025). Helpless Rich Data: The Effect of Financial Openness with Dimensionality Reduction. Economies, 13(3), 62. https://doi.org/10.3390/economies13030062

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