The role of banks in CESEE countries: exploring non-standard determinants of economic growth

Małgorzata Iwanicz-Drozdowska, Paola Bongini, Paweł Smaga and Bartosz Witkowski

Post-Communist Economies, 2019, vol. 31, issue 3, 349-382

Abstract: This paper explores the finance–growth nexus in 14 countries from Central, Eastern and South-eastern Europe (CESEE) over the 1995–2015 period. It investigates whether including two ‘non-standard’ variables, i.e. a credit cycle dummy and foreign bank relevance, deepens our understanding of the role of a typical financial determinant of economic growth, i.e. bank credit. We find evidence of a negative impact of bank credit on economic growth and the significance of cyclical fluctuations of bank credit. In contrast, a higher market share of loans granted by foreign-owned banks in a cyclical upswing and stock market capitalisation are found to have a proactive effect on growth.

Date: 2019
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DOI: 10.1080/14631377.2018.1505694

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