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The link between economic growth and financial development in the Europe

Author

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  • Pawe³ Boles³aw Bojar

    (Faculty of Management, University of Warsaw)

Abstract

This paper shows theoretical and empirical research on the connection between financial system development and economic growth. Despite the fact that empirical studies provide a correlation between these two concepts, the results interpretation is still under scientific discussion. The theoretical part of the paper shows how other researchers describe this relationship – mostly in Europe and United States of America. The main conclusion coming from the theoretical part of the study is that the financial sector actually affects economic growth. Most of the researchers confirm that fact, however, they interpret it in few different ways. The empirical part of the paper uses Europe cross-country data from banks (taking the time frame from 2000 to 2016) to do econometric research which confirm the thesis of connection between financial system and economic growth. The results indicate which components of the financial sector affects most to economic growth. The paper also highlights areas that need additional research.

Suggested Citation

  • Pawe³ Boles³aw Bojar, 2019. "The link between economic growth and financial development in the Europe," Faculty of Management Working Paper Series 12019, University of Warsaw, Faculty of Management.
    • Handle: RePEc:sgm:fmuwwp:12019
    as

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    File URL: http://www.wz.uw.edu.pl/portaleFiles/5630-Faculty%20of%20M/WP/WPS_1_2019_Pawe%C5%82_Bojar1.pdf
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    References listed on IDEAS

    as
    1. Cecchetti, Stephen & Kharroubi, Enisse, 2015. "Why does financial sector growth crowd out real economic growth?," CEPR Discussion Papers 10642, C.E.P.R. Discussion Papers.
    2. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-558, June.
    3. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 717-737.
    4. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
    5. 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.
    6. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934, Elsevier.
    7. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    financial markets; economic development; financial institutions; banks; financial sector;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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