This paper examines the relationship between banking sector development, stock market development, economic
growth, and four other macroeconomic variables in ASEAN countries for the period 1961–2012. Using principal
component analysis for the construction of the development indices and a panel vector auto-regressive model
for testing the Granger causalities, this study finds the presence of both unidirectional and bidirectional causality
links between these variables. The study contributes to understanding the importance of the interrelationship
between the variables and combines the different strands of the literature. It also contributes to the literature by
focusing on a group of countries that have not been studied before. One particular policy recommendation is to
make the banking sector more accessible for those country's inhabitants that do not have bank accounts.
Another policy recommendation is to nurture stock market development, which will facilitate the increased raising
of capital for investment purposes to enhance economic growth.