Financial Development and Economic Growth in Transition Economies: Empirical Evidence from the CEE and CIS Countries

Laura Cojocaru (), Saul Hoffman () and Jeffrey Miller ()
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Laura Cojocaru: Department of Economics, University of Delaware

No 11-22, Working Papers from University of Delaware, Department of Economics

Abstract: We examine the role of financial development in economic growth in the former Communist countries of Central and Eastern Europe and the Commonwealth of Independent States during the first two decades since the beginning of transition. These countries, which had undeveloped financial systems under Communism, provide an interesting test of the relationship between financial development and growth. We show that credit to the private sector had a positive effect on growth in these countries; however, high levels of inflation can render the positive effect of private credit insignificant. High interest rate spreads and reduced banking competition hampered economic growth.

Keywords: transition economies; CEE; CIS; financial sector development; economic growth; panel data (search for similar items in EconPapers)
JEL-codes: O16 P27 P34 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2011
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Citations: View citations in EconPapers (9)

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