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The Effect of Financial Development on Economic Growth among the Central and Eastern European Countries

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  • Tang Donny

    (Temple University, Department of Economics, Philadelphia, PA 19122, USA)

Abstract

To control for the endogeneity problem, this study applies the two-stage least squares technique to examine the impact of bank and stock market development on economic growth in the thirteen Central and Eastern European (CEE) countries in the European Union (EU) during 2001–2020. The first hypothesis states that the higher bank development has not contributed to higher growth in the CEE countries. The overall results only support the hypothesis for the subperiod of 2001–2009. The second hypothesis states that the higher stock market development has not spurred growth in the CEE countries. The overall results support the hypothesis over the entire period of 2001–2020. Finally, despite the CEE integration with the EU developed countries for the past decades, there is a very limited number of empirical studies on the finance–growth relationship in the CEE countries. This study contributes to the relevant literature by examining the bank and stock market development’s relationship with growth in the CEE developing countries.

Suggested Citation

  • Tang Donny, 2024. "The Effect of Financial Development on Economic Growth among the Central and Eastern European Countries," Central European Economic Journal, Sciendo, vol. 11(58), pages 406-423.
    • Handle: RePEc:vrs:ceuecj:v:11:y:2024:i:58:p:406-423:n:1026
    DOI: 10.2478/ceej-2024-0026
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    References listed on IDEAS

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    1. Krugman, Paul R, 1993. "On the Relationship between Trade Theory and Location Theory," Review of International Economics, Wiley Blackwell, vol. 1(2), pages 110-122, June.
    2. António Afonso & M. Carmen Blanco-Arana, 2022. "Financial and economic development in the context of the global 2008-09 financial crisis," International Economics, CEPII research center, issue 169, pages 30-42.
    3. Peter Haiss & Hannes Juvan & Bernhard Mahlberg, 2016. "The Impact of Financial Crises on the Finance–Growth Relationship: A European Perspective," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 45(3), pages 423-444, November.
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    More about this item

    Keywords

    economic growth; bank; financial market;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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