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Influence of Quantitative and Qualitative Factors of Banking Sector Development on Economic Growth in South East European Countries

Author

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  • Vesna Babic- Hodovic

    () (School of Economics and Business in Sarajevo, Bosnia and Herzegovina)

  • Eldin Mehic

    () (School of Economics and Business in Sarajevo, Bosnia and Herzegovina)

  • Emir Agic

    () (School of Economics and Business in Sarajevo, Bosnia and Herzegovina)

Abstract

The aim of this article is to determine the level and the nature of the quantitative and qualitative factors' influences on development of the banking sector and their influence on economic growth in South-East European countries (SEE). We used a OLS model with panel-corrected standard errors (PCSE) and panel data from six transition countries for the period 1999-2006. We measure the qualitative development in the banking sector with the margin between deposit and lending interest rates (INT). Quantitative aspects of the banking sector were measured using variables: Domestic credit to private sector as share of GDP and variable Domestic credit provided by banking sector as share of GDP. Quantitative development of the banking sector affects the economic growth in the observed period, since variable Domestic credit provided by banking sector proved statistically significant. However, the second variable, Domestic credit to private sector, did not prove to be significant in the observed period. With respect to the results obtained for the qualitative banking sector development, the INT variable did not prove significant for economic growth.

Suggested Citation

  • Vesna Babic- Hodovic & Eldin Mehic & Emir Agic, 2009. "Influence of Quantitative and Qualitative Factors of Banking Sector Development on Economic Growth in South East European Countries," Interdisciplinary Management Research, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 5, pages 683-693.
  • Handle: RePEc:osi:journl:v:5:y:2009:p:683-693
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    References listed on IDEAS

    as
    1. 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.
    2. Oleh Havrylyshyn, 2001. "Recovery and Growth in Transition: A Decade of Evidence," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 1-4.
    3. 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.
    4. Valerie R. Bencivenga & Bruce D. Smith, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 195-209.
    5. Gerhard Fink & Peter Haiss & Goran Vuksic, 2006. "Importance of Financial Sectors for Growth in Accession Countries," Chapters,in: Financial Development, Integration and Stability, chapter 11 Edward Elgar Publishing.
    6. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
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    More about this item

    Keywords

    banking sector; economic growth; quantitative and qualitative financial sector development; South-East Europe; Europe; OLS with panel-corrected standard errors (PCSE);

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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