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Impact of Development and Efficiency of Financial Sector on Economic Growth: Empirical Evidence from Developing Countries

Listed author(s):
  • Najia SAQIB

    (Assistant Professor, Business Administration Department, Prince Sultan University Riyadh)

Registered author(s):

    This paper analyses the impact of development and efficiency of financial sector on economic growth of a group of selected developing countries using a cross-country data averaged over the period 2005-2009. The results show that the impact of financial sector efficiency on economic growth is significantly positive for developing countries. For a sample of 50 developing countries the effect of financial sector development and financial sector efficiency is positive and highly significant. The sensitivity analysis also shows that the relationship remain positive and significant no matter what combination of the omitted variables are used in the basic model. Thus, our findings support the core idea that development and efficiency of financial sector stimulates economic growth.

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    File URL: http://www.scientificpapers.org/download/256/
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    Article provided by ScientificPapers.org in its journal Journal of Knowledge Management, Economics and Information Technology.

    Volume (Year): 3 (2013)
    Issue (Month): 3 (June)
    Pages: 1-9

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    Handle: RePEc:spp:jkmeit:1386
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    1. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
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    10. Felix Rioja & Neven Valev, 2004. "Finance and the Sources of Growth at Various Stages of Economic Development," Economic Inquiry, Western Economic Association International, vol. 42(1), pages 127-140, January.
    11. Muhammad Arshad Khan & Abdul Qayyum & Saeed Ahmed Sheikh, 2005. "Financial Development and Economic Growth: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(4), pages 819-837.
    12. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004. "FDI and economic growth: the role of local financial markets," Journal of International Economics, Elsevier, vol. 64(1), pages 89-112, October.
    13. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
    14. Rousseau, Peter L & Wachtel, Paul, 1998. "Financial Intermediation and Economic Performance: Historical Evidence from Five Industrialized Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 657-678, November.
    15. Hermes, Niels & Lensink, Robert, 2000. "Foreign direct investment, financial development and economic growth," Research Report 00E27, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    16. Ireland, Peter N, 1994. "Money and Growth: An Alternative Approach," American Economic Review, American Economic Association, vol. 84(1), pages 47-65, March.
    17. Leamer, Edward E, 1985. "Sensitivity Analyses Would Help," American Economic Review, American Economic Association, vol. 75(3), pages 308-313, June.
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