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Financial development and economic growth: evidence from transition economies

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  • Alexandr Akimov
  • Albert Wijeweera
  • Brian Dollery

Abstract

The hypothesis that financial development promotes economic growth enjoys significant support from empirical evidence drawn from both developed and developing countries alike. However, analogous empirical evidence is still lacking for economies in transition. This article analyses the effects of financial intermediation on the growth of real GDP by employing data for 27 countries over the period of 1989 to 2004. Using an endogenous growth model and panel data analysis techniques, we estimate regressions with various proxies for financial sector development. We find that in contrast to some recent empirical work, there is a robust positive link between financial development and economic growth in transition economies.

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  • Alexandr Akimov & Albert Wijeweera & Brian Dollery, 2009. "Financial development and economic growth: evidence from transition economies," Applied Financial Economics, Taylor & Francis Journals, vol. 19(12), pages 999-1008.
    • Handle: RePEc:taf:apfiec:v:19:y:2009:i:12:p:999-1008
    DOI: 10.1080/09603100701857880
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    2. Demir, Ayse U. & Hall, Stephen G., 2017. "Financial structure and economic development: Evidence on the view of ‘new structuralism’," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 252-259.
    3. Jakhongir Kakhkharov & Alexandr Akimov, 2018. "Financial development in less-developed post-communist economies," Discussion Papers in Finance finance:201801, Griffith University, Department of Accounting, Finance and Economics.
    4. Şen, Hüseyin & Kaya, Ayşe, 2019. "Output-volatility reducing effect of automatic stabilizers: Evidence from nine EMU member states," EconStor Preprints 206687, ZBW - Leibniz Information Centre for Economics.
    5. Hartwell, Christopher A., 2014. "The impact of institutional volatility on financial volatility in transition economies : a GARCH family approach," BOFIT Discussion Papers 6/2014, Bank of Finland, Institute for Economies in Transition.
    6. Jingzhu Chen & Yuemei Ji, 2022. "Is Finance Good for Growth? New Evidence from China," CESifo Working Paper Series 9882, CESifo.
    7. repec:zbw:bofitp:2014_006 is not listed on IDEAS
    8. Shigeki Ono & Ichiro Iwasaki, 2022. "The Finance-Growth Nexus in Europe: A Comparative Meta-Analysis of Emerging Markets and Advanced Economies," Eastern European Economics, Taylor & Francis Journals, vol. 60(1), pages 1-49, January.
    9. Hartwell, Christopher A., 2014. "The impact of institutional volatility on financial volatility in transition economies: a GARCH family approach," BOFIT Discussion Papers 6/2014, Bank of Finland Institute for Emerging Economies (BOFIT).
    10. Iwasaki, Ichiro & Kumo, Kazuhiro, 2016. "Decline and Growth in Transition Economies: A Meta-Analysis," CEI Working Paper Series 2016-9, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    11. Ozili, Peterson K & Ndah, Honour, 2022. "Impact of financial development on bank profitability," MPRA Paper 111337, University Library of Munich, Germany.
    12. de Moraes, Claudio & Galvis-Ciro, Juan Camilo & Gargalhone, Micheli, 2021. "Financial access and interest rate spread: An international assessment," Journal of Economics and Business, Elsevier, vol. 114(C).
    13. Shravani Sharma & Supran Kumar Sharma, 2019. "Evidence on Relationship Between Economic Growth and Financial Development of Selected Northern Indian States: Using Panel VEC Approach," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(4), pages 869-884, December.
    14. Abdul Jalil & Abdul Rauf & Li Han, 2024. "Financial Development, R&D and Knowledge Production: Empirical Evidence from China," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 14617-14642, September.
    15. Wahidin, Deni & Akimov, Alexandr & Roca, Eduardo, 2021. "The impact of bond market development on economic growth before and after the global financial crisis: Evidence from developed and developing countries," International Review of Financial Analysis, Elsevier, vol. 77(C).
    16. Esra Soyu Yıldırım & Cuma Demirtaş & Munise Ilıkkan Özgür, 2022. "Causality Relationship Between Economic, Financial, Political Risk and Growth: The Case of Turkey," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 9(1), pages 165-186, January.
    17. Marques, Luís Miguel & Fuinhas, José Alberto & Marques, António Cardoso, 2012. "Interação entre o mercado acionista e o crescimento económico: Uma apreciação do caso português (1993-2010) [Interaction between the stock market and economic growth: An assessment of the Portugues," MPRA Paper 39808, University Library of Munich, Germany.

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