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Revisiting Finance and Growth in Transition Economies - A Panel Causality Approach

Michael Stemmer ()

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: 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)
New Economics Papers: this item is included in nep-fdg and nep-gro
Date: 2017-05
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01524462
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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) Downloads
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