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Analysis of the relationship between financial development and economic growth in the EU countries

Author

Listed:
  • Edmunds ÄŒižo

    (Daugavpils University, Latvia)

  • Olga Lavrinenko

    (Daugavpils University, Latvia)

  • Svetlana Ignatjeva

    (Daugavpils University, Latvia)

Abstract

To what extent does financial development determine economic growth? Despite the obvious relationship between the level of financial development and economic growth rates, there is still no consensus on the significance and focus of this relation. Is there a directed impact of the level of financial development on economic growth, or does the development of a financial sector follow economic growth? Or is the relation between financial development and economic growth bidirectional? The aim of the research is to analyze the causal relationship between quantitative and dynamic differences in financial development and economic growth in the EU countries in the period 1995 - 2017. The period of the research from 1995 to 2017 is determined by the availability of financial development indicators for the EU countries. In order to prove the directed impact of the level of financial development on economic growth in the EU countries in the period 1995-2017, the average values of growth in the financial development index with the lag forwarding by one year, with the lag falling behind by one year, without the lag, and average values of the GDP growth per capita were analyzed.

Suggested Citation

  • Edmunds ÄŒižo & Olga Lavrinenko & Svetlana Ignatjeva, 2020. "Analysis of the relationship between financial development and economic growth in the EU countries," Insights into Regional Development, VsI Entrepreneurship and Sustainability Center, vol. 2(3), pages 645-660, September.
    • Handle: RePEc:ssi:jouird:v:2:y:2020:i:3:p:645-660
    DOI: 10.9770/ird.2020.2.3(3)
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    References listed on IDEAS

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    Cited by:

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    2. Egidijus Bikas & Greta Bagdonaitė, 2020. "Tax avoidance: the aspect of value added tax," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(2), pages 590-605, December.
    3. Magdalena Zioło & Iwona Bąk & Anna Spoz, 2024. "Sustainable Energy Sources and Financial Development Nexus—Perspective of European Union Countries in 2013–2021," Energies, MDPI, vol. 17(13), pages 1-19, July.
    4. Edvins Karnitis & Janis Bicevskis & Girts Karnitis, 2021. "Measuring the Implementation of the Agenda 2030 Vision in Its Comprehensive Sense: Methodology and Tool," Energies, MDPI, vol. 14(4), pages 1-17, February.
    5. He, Qiao & Xie, Henglang & Zhu, Yichang & Huang, Lingyu, 2024. "The impact of natural resource, information and communication technology adoption, and economic expansion on financial development in post COVID era," Resources Policy, Elsevier, vol. 89(C).
    6. Antonín Korauš & Katarína Havierniková & Miroslav Gombár & Filip Černák & Miroslav Felcan, 2020. "Dimensions and their elements affecting the innovative activities of agricultural SMEs toward their sustainable development," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(2), pages 1142-1157, December.

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    More about this item

    Keywords

    financial development; economic growth;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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