Impact of Financial System’s Development on Economic Development: An Empirical Investigation
Comparisons of financial development across
countries are central to answering many of the questions on factors
leading to economic development. For this reason this study analyzes
the implications of financial system’s development on country’s
economic development. The aim of the article: to analyze the impact
of financial system’s development on economic development. The
following research methods were used: systemic, logical and
comparative analysis of scientific literature, analysis of statistical
data, time series model (Autoregressive Distributed Lag (ARDL)
Model). The empirical results suggest about positive short and long
term effect of stock market development on GDP per capita.
[1] C. Calderon and L. Liu, “The direction of causality between financial
development and economic growth”, Journal of Development
Economics, vol. 72, pp. 321-334, October 2003.
[2] G. F. Da Silva, “The impact of financial system development on
business cycles volatility: cross-country evidence”, Journal of
Macroeconomics, vol. 24, pp. 233-253, June 2002.
[3] L. G. Deidda, “Interaction between economic and financial
development”, Journal of Monetary Economics, vol. 53, pp. 233-248,
March 2006.
[4] B. Eichengreen, R. Gullapalli, and U. Panizza, “Capital account
liberalization, financial development and industry growth: a synthetic
view”, Journal of International Money and Finance, vol. 30, pp. 1090-
1106, October 2011.
[5] M. K. Fung, “Financial development and economic growth: convergence
or divergence?”, Journal of International Money and Finance, vol. 28,
pp. 56-67, February 2009.
[6] C. Gimet, and Th. Lagoarde-Segot, “Financial sector development and
access to finance. Does size say it all?”, Emerging Markets Review, vol.
13, pp. 316-337, September 2012.
[7] M. K. Hassan, B. Sanchez, and J.-S. Yu, “Financial development and
economic growth: new evidence from panel data”, The Quarterly
Review of Economics and Finance, vol. 51, pp. 88-104, February 2011.
[8] Sh.-J. Hsueh, Y.-H. Hu, and Ch.-H. Tu, “Economic growth and financial
development in Asian countries: A bootstrap panel granger causality
analysis”, Economic Modelling, vol. 32, pp. 294-301, May 2013.
[9] M. Kar, Ş. Nazlıoğlu, and H. Ağır, “Financial development and
economic growth nexus in the MENA countries: Bootstrap panel
granger causality analysis”, Economic Modelling, vol. 28, pp. 685-693,
January–March 2011.
[10] R. Levine, “Financial development and economic growth: Views and
agenda”, Journal of Economic Literature, vol. 35, pp. 688-726, June
1997.
[11] Q. Liang and J.-Z. Teng, “Financial development and economic growth:
evidence from China”, China Economic Review, vol. 17, pp. 395-411,
2006.
[12] S. B. Naceur and S. Ghazouani, “Stock markets, banks, and economic
growth: Empirical evidence from the MENA region”, Research in
International Business and Finance, vol. 21, pp. 297-315, June 2007.
[13] P. K. Narayan and S. Narayan, “The short-run relationship between the
financial system and economic growth: New evidence from regional
panels”, International Review of Financial Analysis, vol. 29, pp. 70-78,
September 2013.
[14] S. Sassi and M. Goaied, “Financial development, ICT diffusion and
economic growth: Lessons from MENA region”, Telecommunications
Policy, vol. 37, pp. 252-261, May–June 2013.
[15] A. Zagorchev, G. Vasconcellos, and Y. Bae, “Financial development,
technology, growth and performance: Evidence from the accession to
the EU”, Journal of International Financial Markets, Institutions and
Money, vol. 21, pp. 743-759, December 2011.
[16] J. Zhang, L. Wang, and S. Wang, “Financial development and economic
growth: Recent evidence from China”, Journal of Comparative
Economics, vol. 40, pp. 393-412, August 2012.
[17] P. O. Demetriades and Kh. A. Hussein, “Does financial development
cause economic growth? Time-series evidence from 16 countries”,
Journal of Development Economics, vol. 51, pp. 387-411, December
1996. [18] J. Greenwood, J. M. Sanchez, and Ch. Wang, “Quantifying the impact of
financial development on economic development”, Review of Economic
Dynamics, vol. 16, pp. 194-215, January 2013.
[19] V. Deltuvaitė and L. Sinevičienė, “Investigation of relationship between
financial and economic development in the EU countries,” Procedia
Economics and Finance, to be published.
[20] M. H. Pesaran and R. Smith, “Estimating long-run relationships from
dynamic heterogeneous panels”, Journal of Econometrics, vol. 68, pp.
79-113, July 1995.
[21] K.B. Luintel and M. Khan, “A quantitative reassessment of financegrowth
nexus: Evidence from multivariate VAR”, Journal of
Development Economics, vol. 60, pp. 381-405, December 1999.
[22] The World Bank, Financial Development and Structure Dataset, 2013.
[23] International Monetary Fund, World Economic Outlook Database, 2014.
[1] C. Calderon and L. Liu, “The direction of causality between financial
development and economic growth”, Journal of Development
Economics, vol. 72, pp. 321-334, October 2003.
[2] G. F. Da Silva, “The impact of financial system development on
business cycles volatility: cross-country evidence”, Journal of
Macroeconomics, vol. 24, pp. 233-253, June 2002.
[3] L. G. Deidda, “Interaction between economic and financial
development”, Journal of Monetary Economics, vol. 53, pp. 233-248,
March 2006.
[4] B. Eichengreen, R. Gullapalli, and U. Panizza, “Capital account
liberalization, financial development and industry growth: a synthetic
view”, Journal of International Money and Finance, vol. 30, pp. 1090-
1106, October 2011.
[5] M. K. Fung, “Financial development and economic growth: convergence
or divergence?”, Journal of International Money and Finance, vol. 28,
pp. 56-67, February 2009.
[6] C. Gimet, and Th. Lagoarde-Segot, “Financial sector development and
access to finance. Does size say it all?”, Emerging Markets Review, vol.
13, pp. 316-337, September 2012.
[7] M. K. Hassan, B. Sanchez, and J.-S. Yu, “Financial development and
economic growth: new evidence from panel data”, The Quarterly
Review of Economics and Finance, vol. 51, pp. 88-104, February 2011.
[8] Sh.-J. Hsueh, Y.-H. Hu, and Ch.-H. Tu, “Economic growth and financial
development in Asian countries: A bootstrap panel granger causality
analysis”, Economic Modelling, vol. 32, pp. 294-301, May 2013.
[9] M. Kar, Ş. Nazlıoğlu, and H. Ağır, “Financial development and
economic growth nexus in the MENA countries: Bootstrap panel
granger causality analysis”, Economic Modelling, vol. 28, pp. 685-693,
January–March 2011.
[10] R. Levine, “Financial development and economic growth: Views and
agenda”, Journal of Economic Literature, vol. 35, pp. 688-726, June
1997.
[11] Q. Liang and J.-Z. Teng, “Financial development and economic growth:
evidence from China”, China Economic Review, vol. 17, pp. 395-411,
2006.
[12] S. B. Naceur and S. Ghazouani, “Stock markets, banks, and economic
growth: Empirical evidence from the MENA region”, Research in
International Business and Finance, vol. 21, pp. 297-315, June 2007.
[13] P. K. Narayan and S. Narayan, “The short-run relationship between the
financial system and economic growth: New evidence from regional
panels”, International Review of Financial Analysis, vol. 29, pp. 70-78,
September 2013.
[14] S. Sassi and M. Goaied, “Financial development, ICT diffusion and
economic growth: Lessons from MENA region”, Telecommunications
Policy, vol. 37, pp. 252-261, May–June 2013.
[15] A. Zagorchev, G. Vasconcellos, and Y. Bae, “Financial development,
technology, growth and performance: Evidence from the accession to
the EU”, Journal of International Financial Markets, Institutions and
Money, vol. 21, pp. 743-759, December 2011.
[16] J. Zhang, L. Wang, and S. Wang, “Financial development and economic
growth: Recent evidence from China”, Journal of Comparative
Economics, vol. 40, pp. 393-412, August 2012.
[17] P. O. Demetriades and Kh. A. Hussein, “Does financial development
cause economic growth? Time-series evidence from 16 countries”,
Journal of Development Economics, vol. 51, pp. 387-411, December
1996. [18] J. Greenwood, J. M. Sanchez, and Ch. Wang, “Quantifying the impact of
financial development on economic development”, Review of Economic
Dynamics, vol. 16, pp. 194-215, January 2013.
[19] V. Deltuvaitė and L. Sinevičienė, “Investigation of relationship between
financial and economic development in the EU countries,” Procedia
Economics and Finance, to be published.
[20] M. H. Pesaran and R. Smith, “Estimating long-run relationships from
dynamic heterogeneous panels”, Journal of Econometrics, vol. 68, pp.
79-113, July 1995.
[21] K.B. Luintel and M. Khan, “A quantitative reassessment of financegrowth
nexus: Evidence from multivariate VAR”, Journal of
Development Economics, vol. 60, pp. 381-405, December 1999.
[22] The World Bank, Financial Development and Structure Dataset, 2013.
[23] International Monetary Fund, World Economic Outlook Database, 2014.
@article{"International Journal of Business, Human and Social Sciences:69265", author = "Vilma Deltuvaitė", title = "Impact of Financial System’s Development on Economic Development: An Empirical Investigation", abstract = "Comparisons of financial development across
countries are central to answering many of the questions on factors
leading to economic development. For this reason this study analyzes
the implications of financial system’s development on country’s
economic development. The aim of the article: to analyze the impact
of financial system’s development on economic development. The
following research methods were used: systemic, logical and
comparative analysis of scientific literature, analysis of statistical
data, time series model (Autoregressive Distributed Lag (ARDL)
Model). The empirical results suggest about positive short and long
term effect of stock market development on GDP per capita.
", keywords = "Banking sector, economic development, financial
system’s development, stock market, private bond market.", volume = "9", number = "3", pages = "793-6", }
