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The Impact of Financial Development and Trade Openness on Economic Growth: Time Series Evidence from Luxembourg

Author

Listed:
  • Asra Jabbar

    (Lecturer, Lahore Garrison University, Lahore, Pakistan)

  • Iftikha Ahmad

    (Assistant Professor, Hailey College of Banking and Finance, University of the Punjab (Old Campus), Lahore, Pakistan)

  • Dr. Ayesha Sultan

    (Lecturer, Department of Statistics, Virtual University of Pakistan)

  • Javed Iqbal

    (Lecturer, Department of Statistics, Virtual University of Pakistan)

Abstract

Financial deepening and trade openness are among one of the important drivers of economic growth. Liberalized financial sector promote investors and this boosts up production activities in any economy. On the other side, both exporters and importers together promote trading activities and this encourages quantity of output in any economy. Based on this intuition, this study is structured to inquire the effects of financial development and trade openness on economic growth for Luxembourg economy. This research uses ARDL bounds test for an annual data series from 1980 to 2020 and empirical results suggests that trade openness and financial development have significant and appreciating impact on economic growth. The results further confirm that capital stock has significant and increasing impact on economic growth. Among all these three drivers, trade is the strongest driver that boosts economic growth. Lastly, labor force is witnessed as irrelevant driver for the selected economy. These results are supported by all the diagnostic tests. In order to give boost to economic activities in Luxembourg, trade openness, financial development and capital accumulation should be regulated in such a way that they may remain production friendly in selected country.

Suggested Citation

  • Asra Jabbar & Iftikha Ahmad & Dr. Ayesha Sultan & Javed Iqbal, 2024. "The Impact of Financial Development and Trade Openness on Economic Growth: Time Series Evidence from Luxembourg," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(1), pages 730-735.
    • Handle: RePEc:rfh:bbejor:v:13:y:2024:i:1:p:730-735
    DOI: https://doi.org/10.61506/01.00262
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    References listed on IDEAS

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