Exploring the Finance-Growth Nexus: Evidence from European Economies

Lutfije Ademi () and Besnik Fetai ()
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Lutfije Ademi: South East European University
Besnik Fetai: South East European University

Chapter Chapter 17 in Economic Resilience and Sustainability - Vol. 2, 2026, pp 281-292 from Springer

Abstract: Abstract This study aims to analyze the effect of financial development on economic growth, i.e., whether financial development accelerates economic growth in 24 countries of European continent, in the period 2000–2022. The results have derived from analyses of pooled OLS, fixed and random effects, Hausman Taylor regression and GMM—Arellano Bond dynamic panel—data analysis. Based on these analyses, the study concludes that financial development accelerates economic growth, i.e., has a positive impact on GDP per capita growth; liquid liabilities have a positive impact on GDP per capita growth, whereas financial crisis have a significant negative impact on growth. Since the results conclude that financial development accelerates economic growth, it should be an important factor for different financial institutions to take into consideration while making financial policies. The inclusion of Covid-19 crisis in this study makes this study original on its field and should be as an important source while predicting other financial crisis and their impact on economic growth.

Keywords: Financial development; Economic development; Pooled OLS; Fixed effects; Random effects; Hausman Taylor; Arellano Bond dynamic panel data; Covid-19 crisis; European countries (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-032-04214-9_17

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DOI: 10.1007/978-3-032-04214-9_17

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