Development of Financial Markets and Economic Growth in Developed and Developing Countries within the Framework of Growth Accounting

Abstract

An issue which affects the economic growth is financial development. According to some economists, financial development can increase economic growth by raising the level of savings and investment. Others believe in the effects of transfer of financial development on the economic growth through its on resource allocation and capital efficiency. In this paper, based on the data collected from the World Bank website, it is studied the effect of financial development on GDP in developed and developing countries during the period of 2008–2016, and within the framework of growth accounting by using the panel data. Moreover, the ratio of the value of the stock market to the banks’ credits to the private sector has been used as the index of financial market development. Results show that there is a positive significant relationship between the financial market development and economic growth in developed countries. But there is a negative significant relationship between the financial market development and economic growth in developing countries.

Keywords

• data panel "
• " financial development"
• " gross domestic product"
• " economic growth"