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Impact of Development and Efficiency of Financial Sector on Economic Growth: Empirical Evidence from Developing Countries

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  • Najia SAQIB

    (Assistant Professor, Business Administration Department, Prince Sultan University Riyadh)

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    Abstract

    This paper analyses the impact of development and efficiency of financial sector on economic growth of a group of selected developing countries using a cross-country data averaged over the period 2005-2009. The results show that the impact of financial sector efficiency on economic growth is significantly positive for developing countries. For a sample of 50 developing countries the effect of financial sector development and financial sector efficiency is positive and highly significant. The sensitivity analysis also shows that the relationship remain positive and significant no matter what combination of the omitted variables are used in the basic model. Thus, our findings support the core idea that development and efficiency of financial sector stimulates economic growth.

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    Bibliographic Info

    Article provided by ScientificPapers.org in its journal Journal of Knowledge Management, Economics and Information Technology.

    Volume (Year): 3 (2013)
    Issue (Month): 3 (June)
    Pages: 9

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    Handle: RePEc:spp:jkmeit:1386

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    1. Hermes, Niels & Lensink, Robert, 2000. "Foreign direct investment, financial development and economic growth," Research Report 00E27, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
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    8. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
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    10. Greenwood, Jeremy & Smith, Bruce D., 1997. "Financial markets in development, and the development of financial markets," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 145-181, January.
    11. Ireland, Peter N, 1994. "Money and Growth: An Alternative Approach," American Economic Review, American Economic Association, vol. 84(1), pages 47-65, March.
    12. Nouriel Roubini & Xavier Sala-i-Martin, 1991. "Financial Repression and Economic Growth," NBER Working Papers 3876, National Bureau of Economic Research, Inc.
    13. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004. "FDI and economic growth: the role of local financial markets," Journal of International Economics, Elsevier, vol. 64(1), pages 89-112, October.
    14. Rousseau, Peter L & Wachtel, Paul, 1998. "Financial Intermediation and Economic Performance: Historical Evidence from Five Industrialized Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 657-78, November.
    15. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
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