Financial Development and Growth: Panel Cointegration Evidence from South-Eastern and Central Europe

Viktor Stojkoski and Kristina Popova

MPRA Paper from University Library of Munich, Germany

Abstract: Ever since Schumpeter, macroeconomists have argued that financial development has a large and direct effect on the long run wealth of a nation. In this paper, we empirically investigate this relationship for a panel of 16 South-Eastern and Central European countries over the period 1995-2014 by employing a state-of-the-art panel cointegration technique. We find that financial development has a positive effect on the income per capita. The effect is statistically robust to other estimation methods and is economically large since it is almost twice the size of the gross capital formation. Nevertheless, the panel cointegration tests indicate a possibility of an endogenous relationship between the phenomena.

Keywords: panel-cointegration; financial development; economic growth (search for similar items in EconPapers)
JEL-codes: C23 C51 E50 O11 O47 O52 (search for similar items in EconPapers)
Date: 2016-01-24
New Economics Papers: this item is included in nep-eff, nep-fdg, nep-mac and nep-tid
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https://mpra.ub.uni-muenchen.de/80802/1/MPRA_paper_80802.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:69029

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