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

Author

Listed:
  • Caporale, Guglielmo Maria

    (Brunel University)

  • Rault, Christophe

    (University of Orléans)

  • Sova, Robert

    (CREST & University of Paris 1 Panthéon-Sorbonne)

  • Sova, Anamaria

    (E.B.R.C. Bucharest)

Abstract

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.

Suggested Citation

  • Caporale, Guglielmo Maria & Rault, Christophe & Sova, Robert & Sova, Anamaria, 2014. "Financial Development and Economic Growth: Evidence from Ten New EU Members," IZA Discussion Papers 8397, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp8397
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    More about this item

    Keywords

    transition economies; economic growth; financial development;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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