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The Impact of Financial Sector Development and Sophistication on Sustainable Economic Growth

Cristian Valeriu Paun (), Radu Cristian Musetescu (), Vladimir Mihai Topan () and Dan Dănuleţiu
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Cristian Valeriu Paun: The Bucharest University of Economic Studies, 010374 Bucharest, Romania
Radu Cristian Musetescu: The Bucharest University of Economic Studies, 010374 Bucharest, Romania
Vladimir Mihai Topan: The Bucharest University of Economic Studies, 010374 Bucharest, Romania

Sustainability, 2019, vol. 11, issue 6, 1-21

Abstract: The drivers of economic growth and development are among the most important issues explored by economic theory. Sustainability of economic development was previously linked by various economic schools of thought to natural resources (agriculture, land, minerals, metals etc.), labor force (including skills, productivity, and education), entrepreneurship or technology and innovation. Capital was later introduced by classical economic theory as the key element. Without significant capital accumulation, all other production factors remain idle. The value added of the production process is a result of the existence, the accessibility and the cost of capital. Therefore, the development and the sophistication of the financial sector has gradually become very important for any nation interested in sustainable growth. This paper investigates the impact of financial sector development, sophistication and performance on economic growth based on a panel regression methodology. We found statistically significant results that confirm the importance of this connection and that are very consistent with economic theory and previous relevant articles and studies.

Keywords: economic development; economic growth; capital; sustainable growth and development; financial sector (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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