The Influences and Effects of Financial Development on Economic Growth
Timeframe: Jan 2003 -
Funder: Research Council of Norway
This project examines the empirical relationship between financial development and economic growth. The employed data set includes a representative selection of 60 countries over the years from 1965-1997. To test the empirical relationship between finance and growth, OLS regressions based on three indicators of financial sector development have been applied. These indicators measure the financial sector by size (liquid liabilities) and activity (credit provided to private sector and credit by banks).
In accordance to earlier research, the financial sector plays an important part in economic growth as it can reduce the cost of acquiring information, conducting transactions and facilitate saving mobilisation. By providing these services, the financial sector can enhance resource allocation and increase aggregate savings.
The preliminary results of the analysis are i) a positive statistical relationship exists between financial development and economic growth; ii) developing countries grow faster than industrialised countries (some evidence of convergence).Financial sector developments therefore seem to have at least the same importance in developing countries as in industrialised countries.
Programme
WTO/GATS and economic development: key to 'the new economy'?
Jan 2000 - Dec 2004
