Revisiting Finance and Growth in Transition Economies - A Panel Causality Approach
Michael Stemmer ()
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
This article provides new evidence on the relationship between financial development and economic growth in 15 Eastern European countries between 1994 and 2014. The analysis employs a panel Granger causality framework that is based on seemingly unrelated regression systems and Wald tests with country-specific bootstrap critical values. By relying on several financial development indicators, we find that finance primarily follows GDP per capita in transition economies, supporting a demand-driven hypothesis. In contrast, financial development in the form of financial monetization and credit extension exerts in the majority of countries a negative impact on economic growth. Moreover, a strong foreign bank presence seems to positively impact growth, presumably driven by more efficiency and prudential lending behavior.
Keywords: Economic growth; financial development; transition countries; granger causality; bootstrap (search for similar items in EconPapers)
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Published in 2017
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Working Paper: Revisiting Finance and Growth in Transition Economies - A Panel Causality Approach (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-01524462
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