The dynamic impacts of financial institutions on economic growth: Evidence from the European Union

Jyh-Lin Wu, Han Hou and Su-Yin Cheng

Journal of Macroeconomics, 2010, vol. 32, issue 3, 879-891

Abstract: This paper investigates the dynamic impacts of financial institutions on economic growth based on a panel data set comprised of 13 countries in European Union (EU) over the period of 1976-2005. We found several important results. First, there exists a long-run equilibrium relationship among banking development, stock market development and economic development, and stock market capitalization and liquidity have positive long-run effects on economic development. Second, financial depth may have a negative long-run effect on real output, but improving risk diversification and information services of commercial banks results in stable economic development. Finally, stock market liquidity has a negative short-term influence on economic growth.

Keywords: Financial; development; Stock; markets; Credit; markets; Economic; growth; Panel; mean; group; estimators; Error-correction; models; Panel; unit-root; tests (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (64)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:32:y:2010:i:3:p:879-891

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