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How Do Financial Globalization, Institutions and Economic Growth Impact Financial Sector Development in European Countries?

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  • Nasreen, Samia
  • Mahalik, Mantu Kumar
  • Shahbaz, Muhammad
  • Abbas, Qaisar

Abstract

This paper examines the role of financial globalization, institutions and economic growth on the development of financial sector in European countries. We use panel data covering the period of 1989-2016. Using the composite index of financial development covers various dimensions of financial market, that is, depth, access and efficiency and four-way classification of institutions as suggested by Rodrick (2005) and Law et al. (2018), the empirical results indicate that economic growth and institutional quality are positively associated with financial development. Contrarily, financial globalization hinders the process of financial sector development. The results are robust to using alternative proxies of economic growth, institutional indicators and capturing the period of financial crisis. These empirical findings suggest policy guidelines to develop financial sector by using globalization, institutional quality and economic growth as economic tools.

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  • Nasreen, Samia & Mahalik, Mantu Kumar & Shahbaz, Muhammad & Abbas, Qaisar, 2020. "How Do Financial Globalization, Institutions and Economic Growth Impact Financial Sector Development in European Countries?," MPRA Paper 100457, University Library of Munich, Germany, revised 16 May 2020.
    • Handle: RePEc:pra:mprapa:100457
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    Economic Growth; Financial Development; Financial Globalization; Institutions;
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