Financial Development and Economic Growth: Evidence from Ten New EU Members

Unknown, Article, Research, Preprint English OPEN
Caporale, Guglielmo Maria ; Rault, Christophe ; Sova, Robert ; Sova, Anamaria (2014)
  • Publisher: Institute for the Study of Labor (IZA) Bonn
  • Subject: EU-Staaten (Osteuropa) | Wirtschaftswachstum | dewey330 | E44 | economic growth | causality tests | Financial Development, Economic Growth, Causality Tests, Transition Economies | F36 | E58 | Finanzsektor | Entwicklung | Kausalanalyse | transition economies, economic growth, financial development | transition economies | P26 | financial development
    • jel: jel:E58 | jel:E44 | jel:P26 | jel:F36
      ddc: ddc:330

This paper reviews the main features of the banking and financial sector in ten new EU members, and then examines the relationship between financial development and economic growth in these countries by estimating a dynamic panel model over the period 1994-2007. The evidence suggests that the stock and credit markets are still underdeveloped in these economies, and that their contribution to economic growth is limited owing to a lack of financial depth. By contrast, a more efficient banking sector is found to have accelerated growth. Furthermore, Granger causality test indicate that causality runs from financial development to economic growth, but not in the opposite direction.
  • References (2)

    Table 2. The evolution of the ratio of private sector credit to GDP (in percent) Year 2000 2001 2002 2003 2004 2005 2006 2007

    Table 3 Evolution of credit to households in percent of GDP Year 2000 2001 2002 2003 2004 2005 2006 2007

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