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Financial development and economic growth in transition countries

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  • Neimke, Markus

Abstract

To explain the growth dynamics in the transition economies of Eastern Europe and the former Soviet Union the relative importance of monetary variables is analysed. A theoretical as well as an empirical approach are employed to make predictions about how financial development will affect economic growth. In a simple growth model it is shown that enhanced financial market development should increase the overall growth rate unambiguously. The empirical analysis, following approaches conducted for industrial and developing countries, includes a wide set of indicators, each of them capturing different aspects of financial development. Actually, on the basis of different econometric estimations a significant growth impact of financial development is identified for the economies under study. Beside increasing investment, total factor productivity has to be considered as an important transmission channel, which is influenced by financial development.

Suggested Citation

  • Neimke, Markus, 2003. "Financial development and economic growth in transition countries," IEE Working Papers 173, Ruhr University Bochum, Institute of Development Research and Development Policy (IEE).
    • Handle: RePEc:zbw:ieewps:173
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    2. Stati Statev, 2009. "The Interaction between the Banking System and the Real Economy (Part One: Theory and Methodology)," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 38-66.
    3. Milena Lipovina-Bozovic & Julija Cerovic Smolovic, 2016. "Evidence on Economic Growth and Financial Development in Montenegro," Management, University of Primorska, Faculty of Management Koper, vol. 11(4), pages 349-365.
    4. Stati Statev, 2009. "The Interaction between the Banking System and the Real Economy (Part One: Theory and Methodology)," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 3-28.
    5. Małgorzata Dobrowolska & Izydorcyzk Bernadetta, 2021. "Classifications of People Addicted to Work, Treatment and Measurement of Workaholism – A Case Study," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 3, May - Aug.

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