The Impact of Financial Development and Trade Openness on Economic Growth: Time Series Evidence from Luxembourg

Asra Jabbar, Iftikha Ahmad, Dr. Ayesha Sultan and Javed Iqbal
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Asra Jabbar: Lecturer, Lahore Garrison University, Lahore, Pakistan
Iftikha Ahmad: Assistant Professor, Hailey College of Banking and Finance, University of the Punjab (Old Campus), Lahore, Pakistan
Dr. Ayesha Sultan: Lecturer, Department of Statistics, Virtual University of Pakistan
Javed Iqbal: Lecturer, Department of Statistics, Virtual University of Pakistan

Bulletin of Business and Economics (BBE), 2024, vol. 13, issue 1, 730-735

Abstract: Financial deepening and trade openness are among one of the important drivers of economic growth. Liberalized financial sector promote investors and this boosts up production activities in any economy. On the other side, both exporters and importers together promote trading activities and this encourages quantity of output in any economy. Based on this intuition, this study is structured to inquire the effects of financial development and trade openness on economic growth for Luxembourg economy. This research uses ARDL bounds test for an annual data series from 1980 to 2020 and empirical results suggests that trade openness and financial development have significant and appreciating impact on economic growth. The results further confirm that capital stock has significant and increasing impact on economic growth. Among all these three drivers, trade is the strongest driver that boosts economic growth. Lastly, labor force is witnessed as irrelevant driver for the selected economy. These results are supported by all the diagnostic tests. In order to give boost to economic activities in Luxembourg, trade openness, financial development and capital accumulation should be regulated in such a way that they may remain production friendly in selected country.

Keywords: Quantity of Output; Financial Development; Trade Openness; ARDL Approach; Luxembourg (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:rfh:bbejor:v:13:y:2024:i:1:p:730-735

DOI: 10.61506/01.00262

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