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Financial Development and Economic Growth: Evidence from Ten New EU Members

  • Guglielmo Maria Caporale
  • Christophe Rault
  • Robert Sova
  • Anamaria Sova

This paper reviews the main features of the banking and financial sector in ten new EU members, and then examines the relationship between financial development and economic growth in these countries by estimating a dynamic panel model over the period 1994-2007. The evidence suggests that the stock and credit markets are still underdeveloped in these economies, and that their contribution to economic growth is limited owing to a lack of financial depth. By contrast, a more efficient banking sector is found to have accelerated growth. Furthermore, Granger causality test indicate that causality runs from financial development to economic growth, but not in the opposite direction.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.342404.de/dp940.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 940.

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Length: 39 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwwpp:dp940
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  19. repec:fth:wobaco:1083 is not listed on IDEAS
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