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Financial Intermediation and Economic Growth: Evidence from the Baltic countries

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  • Soultanaeva, Albina

    ()
    (Department of Economics, Umeå University)

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    Abstract

    The hypothesis that financial development promotes economic growth is largely supported by empirical studies. This hypothesis is tested for the three Baltic countries using a time series approach that allows for interactions between the three countries. We find that economic growth is a positive function of financial development, proxied by banking credit available to private sector, in the long run. The results also show that there are long run interactions between the three Baltic countries.

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    Bibliographic Info

    Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 817.

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    Length: 11 pages
    Date of creation: 21 Dec 2010
    Date of revision:
    Handle: RePEc:hhs:umnees:0817

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    Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
    Phone: 090 - 786 61 42
    Fax: 090 - 77 23 02
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    Web page: http://www.econ.umu.se/
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    Keywords: Cointegration; Spillovers; Financial development; Emerging markets;

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    1. Ludmila Fadejeva & Aleksejs Melihovs, 2008. "The Baltic States and Europe: Common Factors of Economic Activity," Working Papers, Latvijas Banka 2008/03, Latvijas Banka.
    2. Luintel, Kul B. & Khan, Mosahid, 1999. "A quantitative reassessment of the finance-growth nexus: evidence from a multivariate VAR," Journal of Development Economics, Elsevier, Elsevier, vol. 60(2), pages 381-405, December.
    3. Calderon, Cesar & Liu, Lin, 2003. "The direction of causality between financial development and economic growth," Journal of Development Economics, Elsevier, Elsevier, vol. 72(1), pages 321-334, October.
    4. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 12(2-3), pages 231-254.
    5. Guglielmo Maria Caporale & Christophe Rault & Robert Sova & Anamaria Sova, 2009. "Financial Development and Economic Growth: Evidence from Ten New EU Members," Discussion Papers of DIW Berlin 940, DIW Berlin, German Institute for Economic Research.
    6. Paul Wachtel & Peter L. Rousseau, 2010. "Economic Growth and Financial Depth: Is the Relationship Extinct Already?," Working Papers id:3225, eSocialSciences.
    7. 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, Blackwell Publishing, vol. 30(4), pages 657-78, November.
    8. Philip Arestis & Panicos O. Demetriades & Kul B. Luintel, 1997. "Financial Development and Economic Growth: the Role of Stock Markets," Keele Department of Economics Discussion Papers (1995-2001), Department of Economics, Keele University 97/05, Department of Economics, Keele University.
    9. Rioja, Felix & Valev, Neven, 2004. "Does one size fit all?: a reexamination of the finance and growth relationship," Journal of Development Economics, Elsevier, Elsevier, vol. 74(2), pages 429-447, August.
    10. Fink, Gerhard & Haiss, Peter & Vuksic, Goran, 2009. "Contribution of financial market segments at different stages of development: Transition, cohesion and mature economies compared," Journal of Financial Stability, Elsevier, Elsevier, vol. 5(4), pages 431-455, December.
    11. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    12. Hondroyiannis, George & Lolos, Sarantis & Papapetrou, Evangelia, 2005. "Financial markets and economic growth in Greece, 1986-1999," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 15(2), pages 173-188, April.
    13. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, Elsevier, vol. 37(2-3), pages 613-622, April.
    14. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198774501, October.
    15. Li, Hongyi & Maddala, G. S., 1997. "Bootstrapping cointegrating regressions," Journal of Econometrics, Elsevier, Elsevier, vol. 80(2), pages 297-318, October.
    16. P. J. Dawson, 2003. "Financial development and growth in economies in transition," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 10(13), pages 833-836.
    17. Clive, W.J. & Lin, Jin-Lung, 1995. "Causality in the Long Run," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 11(03), pages 530-536, June.
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