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Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE Countries

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  • Paola Bongini

    () (School of Economics and Statistics, Milan-Bicocca University, 20126 Milano, Italy)

  • Małgorzata Iwanicz-Drozdowska

    () (Institute of Finance, Warsaw School of Economics, 02-554 Warszawa, Poland)

  • Paweł Smaga

    () (Institute of Finance, Warsaw School of Economics, 02-554 Warszawa, Poland
    National Bank of Poland, 00-919 Warszawa, Poland)

  • Bartosz Witkowski

    () (Institute of Econometrics, Warsaw School of Economics, 02-554 Warszawa, Poland)

Abstract

This study focuses on the role of financial development in the economic growth of Central, Eastern and South-Eastern European (CESEE) countries in the post-communist era (1995–2014), which coincides with the opening up of financial markets to foreign investors and the global financial crisis. We investigate whether economic growth in CESEE countries has benefited from the presence of foreign-owned banks. To this end, we introduce some refined measures of financial development and control for banks’ financial strength. Our results challenge the idea that bank credit fosters economic growth and that foreign-owned banks are indisputably a positive addition to local markets able to foster economic growth.

Suggested Citation

  • Paola Bongini & Małgorzata Iwanicz-Drozdowska & Paweł Smaga & Bartosz Witkowski, 2017. "Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE Countries," Sustainability, MDPI, Open Access Journal, vol. 9(3), pages 1-25, March.
  • Handle: RePEc:gam:jsusta:v:9:y:2017:i:3:p:335-:d:91990
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    Cited by:

    1. Sayef Bakari, 2017. "The Three-Way Linkages Between Export, Import And Economic Growth: New Evidence From Tunisia," Journal of Smart Economic Growth, , vol. 2(3), pages 13-53, December.

    More about this item

    Keywords

    financial development; economic growth; foreign-owned banks; post-communist economies;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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