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Financial and economic development in the context of the global 2008-09 financial crisis

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  • Afonso, António
  • Blanco-Arana, M. Carmen

Abstract

We revisit the relationship between economic growth and financial development in OECD/EU countries in the period 1990–2016, encompassing the 2008-09 Global Financial Crisis. We consider several variables of financial development to evaluate their influence on economic growth when they collectively interact in advanced economies. Thus, using a random effects model and the generalized method of moments (GMM), we find that an increase in domestic credit and market capitalisation, as well as the market turnover ratio of domestic shares, lead to a significant positive effect on GDP per capita. Furthermore, we find linear and non-linear impacts of financial development on economic growth. Other determinants are also highly significant for economic growth, such as expenditure on education, inflation, and unemployment rates.

Suggested Citation

  • Afonso, António & Blanco-Arana, M. Carmen, 2022. "Financial and economic development in the context of the global 2008-09 financial crisis," International Economics, Elsevier, vol. 169(C), pages 30-42.
    • Handle: RePEc:eee:inteco:v:169:y:2022:i:c:p:30-42
    DOI: 10.1016/j.inteco.2021.11.006
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    More about this item

    Keywords

    Financial development; Economic growth; Panel data; Random effects model; GMM; OECD; EU countries;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G01 - Financial Economics - - General - - - Financial Crises
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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