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Financial Development and Economic Growth in Transition Economies: Empirical Evidence from the CEE and CIS Countries

  • Laura Cojocaru

    ()

    (Department of Economics, University of Delaware)

  • Saul Hoffman

    ()

    (Department of Economics, University of Delaware)

  • Jeffrey Miller

    ()

    (Department of Economics, University of Delaware)

We examine the role of financial development in economic growth in the former Communist countries of Central and Eastern Europe and the Commonwealth of Independent States during the first two decades since the beginning of transition. These countries, which had undeveloped financial systems under Communism, provide an interesting test of the relationship between financial development and growth. We show that credit to the private sector had a positive effect on growth in these countries; however, high levels of inflation can render the positive effect of private credit insignificant. High interest rate spreads and reduced banking competition hampered economic growth.

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File URL: http://graduate.lerner.udel.edu/sites/default/files/ECON/PDFs/RePEc/dlw/WorkingPapers/2011/UDWP2011-22.pdf
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Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 11-22.

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Length: 32 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:dlw:wpaper:11-22.
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Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
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  1. repec:ner:tilbur:urn:nbn:nl:ui:12-3125498 is not listed on IDEAS
  2. Peter L. Rousseau & Paul Wachtel, 2011. "What Is Happening To The Impact Of Financial Deepening On Economic Growth?," Economic Inquiry, Western Economic Association International, vol. 49(1), pages 276-288, 01.
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  17. Rousseau, Peter L. & Wachtel, Paul, 2002. "Inflation thresholds and the finance-growth nexus," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 777-793, November.
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  24. Koivu, Tuuli, 2002. "Do efficient banking sectors accelerate economic growth in transition countries," BOFIT Discussion Papers 14/2002, Bank of Finland, Institute for Economies in Transition.
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