engleski

Financial Intermediation and Growth – Evidence from Transition EU Member and Candidate Countries

Differences in performing financial intermediaries’ functions may explain the disparity in growth rates across countries. This is a hypothesis that emerges from linking the theory of financial intermediation and the endogenous growth theory and is largely supported by the empirical evidence. However, the results from studies on European transition countries are mixed. Using the endogenous growth model and a panel estimation technique, this study examines whether financial intermediation affects the economic growth in 12 transition European Union (EU) member countries, as well as candidate countries, between the years of 1991 and 2006. After controlling for other influences on economic growth, both size and effectiveness of financial intermediation were found to be robustly predictive of increased economic activity. Thus, our findings support the view of the positive contribution of financial intermediation to economic growth.

financial intermediation; economic growth; panel; transition

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