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Financial Development and Economic Growth: An Empirical Investigation of three European Union Member - Countries

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  • Antonios Adamopoulos

Abstract

Purpose: This paper investigates the relationship between financial development and economic growth for three European Union member countries, Greece, Ireland and UK. Design/Methodology/Approach: For this reason the existence of the long-run relationship between these variables applying the cointegration analysis is examined as suggested by Johansen and Juselious. Findings: Granger causality tests based on a vector error correction model (VECM) indicated that there is a causal relationship between financial development and economic growth in the three European Union’s member countries. Practical Implications: The Vector Error Correction specification forces the long-run behaviour of the endogenous variables to converge to their cointegrating relationships, while accommodates the short-run dynamics. Originality/Value: The study offers an in-depth insight into econometric modelling of economic growth.

Suggested Citation

  • Antonios Adamopoulos, 2020. "Financial Development and Economic Growth: An Empirical Investigation of three European Union Member - Countries," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 10(1), pages 3-24.
    • Handle: RePEc:ers:ijfirm:v:10:y:2020:i:1:p:3-24
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial Development; Economic Growth; Cointegration; Granger Causality.;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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