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Financial Development and Growth: Panel Cointegration Evidence from South-Eastern and Central Europe

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  • Stojkoski, Viktor
  • Popova, Kristina

Abstract

Ever since Schumpeter, macroeconomists have argued that financial development has a large and direct effect on the long run wealth of a nation. In this paper, we empirically investigate this relationship for a panel of 16 South-Eastern and Central European countries over the period 1995-2014 by employing a state-of-the-art panel cointegration technique. We find that financial development has a positive effect on the income per capita. The effect is statistically robust to other estimation methods and is economically large since it is almost twice the size of the gross capital formation. Nevertheless, the panel cointegration tests indicate a possibility of an endogenous relationship between the phenomena.

Suggested Citation

  • Stojkoski, Viktor & Popova, Kristina, 2016. "Financial Development and Growth: Panel Cointegration Evidence from South-Eastern and Central Europe," MPRA Paper 69029, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:69029
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    References listed on IDEAS

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    More about this item

    Keywords

    panel-cointegration; financial development; economic growth;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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