Is There "Too Much Finance" in Central and Eastern European Countries?

• Autorzy: Wojciech Grabowski , Iwona Maciejczyk-Bujnowicz
• Języki publikacji: EN

Abstrakty

EN

In this paper, the parameters of the growth regression, including different variables measuring the degree of financial development for the Central and Eastern European countries are estimated. Next, the optimal values of specific variables measuring the level of financial development are calculated. The results of the empirical investigation indicate that countries with more stable financial markets and institutions and greater access to them grew faster in the period 2001-2015. The results reflecting the impact of the financial deepening on economic growth are more ambiguous. In the pre-crisis period, the relationship between the depth of financial institutions and economic growth turned out to be insignificant. After 2007, countries with moderate values (about 60%) of this coefficient recorded higher rates of growth in real GDP. A U-shaped relationship between the depth of financial markets and economic growth was identified. However the optimal level of development of stock markets was much higher in 2001-2007 than after the Lehman Brothers bankruptcy.(original abstract)

Słowa kluczowe

EN

Financial system; Economic growth; Generalized method of moments (GMM); Panel model

PL

System finansowy; Wzrost gospodarczy; Uogólniona metoda momentów; Modele panelowe

• Czasopismo: Argumenta Oeconomica
• Rocznik: 2020
• Numer: nr 2 (45)
• Strony: 5--30

Twórcy

autor

Wojciech Grabowski

• University of Lodz, Poland

autor

Iwona Maciejczyk-Bujnowicz

• University of Lodz, Poland

Bibliografia

• Adjasi, C. K. D., Biekpe, N., Stock market development and economic growth: The case of selected African countries, "African Development Review", 18, pp. 144-161, 2006.
• Aghion, P., Howitt, P., A Model of Growth through Creative Destruction, "Econometrica", 60, pp. 323-351, 1992.
• Aghion, P., Howitt, P., Mayer-Foulkes, D., The effect of financial development on convergence: theory and evidence, "Quarterly Journal of Economics" 120, pp. 173-222, 2005.
• Aghion, P., Bacchetta, P., Ranciere, P., Rogoff, K., Exchange rate volatility and productivity growth: The role of financial development, "Journal of Monetary Economics", 56, pp. 494--513.
• Ahmed, S. M., Ansari, M. I., Financial sector development and economic growth: the South-Asian experience, "Journal of Asian Economics", 9, pp. 503-517, 1998.
• Akimov, A., Wijeweer, A., Dollery, B., Financial development and economic growth: Evidence from transition economies, "Applied Financial Economics", 19, pp. 999-1008, 2009.
• Alessi, L., Ghysels, E., Onorante, L., Peach, R., Potter, S., Central Bank Macroeconomic Forecasting during the Global Financial Crisis: The European Central Bank and Federal Reserve Bank of New York Experiences, "Journal of Business and Economic Statistics", 32, pp. 483-500, 2014.
• Al-Yousif, K. Y., Financial development and economic growth. Another look at the evidence from developing countries, "Review of Financial Economics", 11, pp. 131-150, 2002.
• Arcand, J.-L., Berkes, E., Panizza, U., Too much finance?, "Journal of Economic Growth", 20, pp. 105-148, 2015.
• Arellano, M., Bond, S., Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations, "Review of Economic Studies", 58, pp. 277-297, 1991.
• Atkins, R. L., Financial Development and Economic Growth in Transition Countries in Southeast Europe, "AYSPS", Georgia State University, 2006.
• Bagehot, W., Lombard Street: A Description of the Money Market. Henry S. King and Co., London 1873.
• Balgova, M., Nies, M., Plekhanov, A., The economic impact of reducing non-performing loans, EBRD Working Paper, p. 193, 2016.
• Baier, S. L., Dwyer, G. P., Tamura, R., Does opening of a stock exchange increase economic growth?, "Journal of International Money and Finance", 23, pp. 311-331, 2004.
• Barro, R. J. Sala-i-Martin, X., Economic Growth. MIT Press, New York 2003.
• Barro, R., Economic Growth in a Cross Section of Countries, "Quarterly Journal of Economics", 106, pp. 407-443, 1991.
• Barro, R. J., Sala-i-Martin, X., Economic Growth. MIT Press, New York 2003.
• Baumol, W. J., Productivity growth, convergence and welfare: What the long-run data show, "American Economic Review", 76, pp. 1072-1085, 1986.
• Beck, T., Levine, R., Loayza, N., Finance and the sources of growth, "Journal of Financial Economics", 58, pp. 261-300, 2000.
• Beck, T., Levine, R. Stock markets, banks and growth: Panel evidence, "Journal of Banking & Finance", 28, pp. 423-442, 2004.
• Beck, T., Degryse, H., Kneer, Ch., Is more finance better? Disentangling intermediation and size effects of financial systems, "Journal of Financial Stability", 10, pp. 50-64, 2014.
• Bencivenga, V. R., Smith, B. D., Financial intermediation and endogenous growth, "Review of Economic Studies", 58, pp. 195-209, 1991.
• Bencivenga, V. R., Smith, B. D., Starr, R. M., Transactions Costs, Technological Choice and Endogenous Growth, "Journal of Economic Theory", 67, pp. 53-117, 1995.
• Bieńkowski, W., Gawrońska-Nowak, B., Grabowski, W., Comovements of stock markets in the CEE-3 countries during the global financial crisis, "Eastern European Economics", 52, pp. 32-55, 2014.
• Blundell, R., Bond S., Initial conditions and moment restrictions in dynamic panel data models, "Journal of Econometrics", 87, pp. 115-143, 1998.
• Bongini, P., Iwanicz-Drozdowska, M., Smaga, P., Witkowski, B., Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE countries, "Sustainability", 9, pp. 335-344, 2017.
• Bonin, J., Watchel, P., Financial sector development in transition economies: Lessons from the first decade, "Financial markets, institutions and instruments", 12, pp. 1-66, 2003.
• Bumann, S., Hermes, N., Lensink, R., Financial liberalization and economic growth: A meta-analysis, "Journal of International Money and Finance", 33, pp. 255-281, 2013.
• Byrne, D., Kelly, R., Bank asset quality and monetary policy pass-through, "Research Technical Papers", No. 11/RT/17, 2017.
• Carp, L., Can Stock Market Development Boost Economic Growth? Empirical Evidence from Emerging Markets in Central and Eastern Europe, "Procedia Economics and Finance", 3, pp. 438-444, 2012.
• Cecchetti, S., Kharroubi, E., Reassessing the impact of finance on growth, "BIS Working Paper", 381, 2012.
• Cecchetti, S., Kharroubi, E., Why does financial sector growth crowd out real economic growth?, "BIS Working Papers", 490, 2015.
• Chakraborty, I., Goldstein, I., MacKinley, A., Do asset price booms have negative real effects?, 2014, available at https://pdfs.semanticscholar.org/18b0/677785fe407fae74d95ab57bfe4cf91ae24b.pdf?_ga=2.268345038.115442646.1602273106-555574861.1602273106
• Choe, C., Mossa, I. A., Financial system and economic growth: the Korean experience, "World Development", 27, pp. 1069-1082, 1999.
• Christopoulos, D. K., Tsionas, E. G., Financial development and economic growth: evidence from panel unit root and co-integration tests, "Journal of Development Economics", 73, pp. 55-74, 2004.
• Ciccone, A., Jarocinski, M., Determinants of economic growth. Will data tell?, "ECB Working Paper", 852, 2008.
• Cihak, M., Hesse, H., Islamic Banks and Financial Stability: An Empirical Analysis, "Journal of Financial Services Research", 38, pp. 95-113, 2010.
• Cihak, M., Demirguc-Kunt, A., Feyen, E., Levine, R., Financial development in 205 economies, 1960 to 2010,"NBER Working Paper Series", 18946, 2013.
• Cojocaru, L., Falaris, E. M., Hoffman, S. D., Miller, J. B., Financial System Development and Economic Growth in Transition Economies: New Empirical Evidence from the CEE and CIS countries, "Emerging Markets Finance and Trade", 52, pp. 223-236, 2016.
• Cohen, D., Soto, M., Growth And Human Capital: Good Data, Good Results, "Journal of Economic Growth", 12, pp. 51-76, 2007.
• Cournede, B., Denk, O., Finance and economic growth in OECD and G20 countries, "OECD Department Working Papers", 1223, 2015.
• Creel, J., Hubert, P., Labondance, F., Financial stability and economic performance, "Economic Modelling", 48, pp. 25-40, 2015.
• Dalgaard, C., On the empirics of foreign aid and growth, "Economics Journal", 114, pp. 229-244, 2002.
• Dawson, J. W., Causality in the freedom-growth relationship, "European Journal of Political Economy", 19, pp. 479-495, 2003.
• Dell'Ariccia, G., Igan, D., Laeven, L., Credit booms and lending standards: Evidence from the subprime mortgage market, "Journal of Money, Credit and Banking", 44, pp. 367-384, 2012.
• Dogan, N., Saracoglu, B., Income Convergence of the European Union and Candidate Countries: Are they All the Same?, "International Research Journal of Finance and Economics", 12, pp. 160-164, 2007.
• Dudian, M., Popa, R. A., Financial development and economic growth in Central and Eastern Europe, "Theoretical and Applied Economics", 20, pp. 59-68, 2013.
• Flannery, M. J., Rangan, K. P., What caused the bank capital build-up of the 1990s?, "Review of Finance", 12, pp. 391-429, 2008.
• Flannery, M. J., Hankins, K. W., Estimating dynamic panel models in corporate finance, "Journal of Corporate Finance", 19, pp. 1-19, 2013.
• Friedman, M., Schwartz, A. J., Monetary history of the United States, 1867-1960. Princeton University Press, Princeton 1963.
• Fung, M., Financial development and economic growth: Convergence or divergence?, "Journal of International Money and Finance", 28, pp. 56-67, 2009.
• Goldsmith, R. W., Financial structure and development. Yale University Press, New Haven 1969.
• Gradzewicz, M., Growiec, J., Kolasa, M., Postek, L., Strzelecki, P., Poland's uninterrupted growth performance: New growth accounting evidence, "Post-Communist Economies", 30, pp. 238-272, 2018.
• Greenwood, J., Jovanovic, B., Financial development, growth and the distribution of income, "Journal of Political Economy", 98, pp. 1076-1107, 1990.
• Hansson, P., Joung, L., Finance and economic growth; the case of Sweden 1834-1991, "Research in Economics", 51, pp. 275-301, 1997.
• Ibrahim, M., Alagiede, P., The effect of financial development on economic growth in sub-Saharan Africa, "Journal of Policy Modelling", 40, pp. 1104-1125, 2018.
• Ireland, P. N., Money and growth: an alternative approach, "American Economic Review", 84, pp. 47-65, 1994.
• Islam, N., Growth Empirics: A Panel Data Approach, "Quarterly Journal of Economics", 110, pp. 1127-1170, 1995.
• Jayakumar, M., Pradhan, R. P., Dash, S., Maradana, R. P., Gaurav, K., Bank competition, bank stability, and economic growth: are feedback effects at work?, "Journal of Economics and Business", 96, pp. 15-41, 2018.
• Jokippi, T., Monnin, P., The impact of banking sector stability on real economy, "Journal of International Money and Finance", 32, pp. 1-16, 2013.
• Kaminsky, G., Reinhart, C., The Twin Crises: The Causes of Banking and Balance of Payment Problems, "American Economic Review", 89, pp. 473-500, 1999.
• King, R. G., Levine, R., Finance and Growth: Schumpeter Might be Right, "Quarterly Journal of Economics", Vol. 108, pp. 717-737, 1993.
• Kiviet, J., On bias, inconsistency and efficiency of various estimators in dynamic panel data models, "Journal of Econometrics", 68, pp. 53-78, 1995.
• Klein, P.-O., Weil, L., Bank profitability and economic growth, BOFIT Discussion Papers, No. 15, 2018.
• Kutan, A. M., Yigit, T. M., Nominal and Real Stochastic Convergence of Transition Economies, "Journal of Comparative Economics", 32, pp. 23-36, 2004.
• Laeven, L., Levine, R., Bank Governance, Regulation and Risk Taking, "Journal of Financial Economics", 93, pp. 259-275, 2009.
• Law, S. H., Singh, N., Does too much finance harm economic growth?, "Journal of Banking and Finance", 41, pp. 36-44, 2014.
• Lee, K., Kim, B.-Y., Park, Y.-Y., Sanidas, E., Big Business and Economic Growth: Identifying a Binding Constraint for Growth with Country Panel Analysis, "Journal of Comparative Economics", 41, pp. 561-582, 2013.
• Lee, I. H., Kim, K., Exchange rate flexibility, financial market openness, and economic growth, "Asian Economic Papers", 17, pp. 145-162, 2018.
• Levine, R., Stock Markets, Growth and Tax Policy, "Journal of Finance", 46, pp. 1445-1465, 1991.
• Levine, R., Zervos, S., Stock Markets, Banks and Economic Growth, "American Economic Review", 88, pp. 537-558, 1998.
• Love, I., Peria, M. S. M., How Bank Competition affects firms; access to finance, "World Bank Economic Review", 29, pp. 413-448, 2014.
• Lucas, R. E., On the Mechanics of Economic Development, "Journal of Monetary Economics", 22, pp. 3-42, 1988.
• MacKinnon, J. G., Smith Jr., A. A., Approximate bias correction in econometrics, "Journal of Econometrics", 85, pp. 205-230, 1998.
• Maddala, G. S., Wu, S., A comparative study of unit root tests with panel data and a new simple test, "Oxford Bulletin of Economics and Statistics", 61, pp. 631-652, 1999.
• Maddaloni, A., Peydro, J.-L., Bank Risk-taking, securitization, supervision and low interest rates: Evidence from the euro area and the U.S. lending standards, "Review of Financial Studies", 24, pp. 2121-2165, 2011.
• Marcinkowska, M., Wdowiński, P., Flejterski, S., Bukowski, S., Zygierewicz, M., Wpływ regulacji sektora bankowego na wzrost gospodarczy - wnioski dla Polski, Materiały i Studia NBP [The impact of the regulations in the banking sector on economic growth - conclusions for Poland], 305, 2014.
• Matkowski, Z., Próchniak, M., Economic Convergence between the CEE-8 and the European Union, "Eastern European Economics", 45, pp. 59-76, 2007.
• Nannicini, T., Billmeier, A., Economies in Transition: How Important Is Trade Openness for Growth?, "Oxford Bulletin of Economics and Statistics", 73, pp. 287-314, 2011.
• Obstfeld, M., Risk-Taking, Global Diversification and Growth, "American Economic Review", 84, pp. 1310-1329, 1994.
• Pan, L., Mishra, V., Stock market development and economic growth: Empirical evidence from China, "Economic Modelling", 68, pp. 661-673, 2018.
• Panizza, U., Nonlinearities in the relationship between finance and growth, "Comparative Economic Studies", 60, pp. 44-53, 2018.
• Petkovski, M., Kjosevski, J., Does banking sector development promote economic growth? An empirical analysis for selected countries in Central and South Eastern Europe, "Economic Research - Ekonomska Iztrazivanja", 27, pp. 55-66, 2014.
• Philippon, T., Financiers vs. engineers: should the financial sector be taxed or subsidized?, "American Economic Journal: Macroeconomics", 2, pp. 158-182, 2010.
• Philippon, T., Reshef, A., Wages and human capital in the U.S. finance industry: 1909-2006, "Quarterly Journal of Economics", 127, pp. 1551-1609, 2012.
• Próchniak, M., Witkowski, B., Real β-Convergence of Transition Countries, "Eastern European Economics", 51, pp. 6-26, 2013.
• Próchniak, M., Wasiak, K., The impact of the financial system on economic growth in the context of the global crisis: empirical evidence for the EU and OECD countries, "Empirica", 44, pp. 295-337, 2017.
• Qamruzzman, M., Jianguo, W., Nexus between financial innovation and economic growth in South Asia: Evidence from ARDL and Non-linear ARDL approaches, "Financial innovation", 5, pp. 1-19, 2018.
• Rapp, M.C., Udoieva, I. A., What matters in the finance-growth nexus of advanced economies? Evidence from OECD countries, "Applied Economics", 50, pp. 676-690, 2018.
• Rioja, F., Valev, N., Does one size fit all? A re-examination of the finance and growth relationship, "Journal of Development Economics", 74, pp. 429-447, 2004.
• Robinson, J., The Generalization of the General Theory [in:] Robinson, J. (ed.), The rate of interest and other essays. Macmillan, London 1952.
• Rodrik, D., Subramanian, A., Why did financial globalization disappoint?, "IMF Staff Papers", 56, pp. 112-138, 2009.
• Rousseau, P., Watchel, P., What is happening to the impact of financial deepening on economic growth?, "Economic inquiry", 49, pp. 276-288, 2011.
• Ryan, R. M., O'Toole, C. M., McCann, F., Does bank market power affect financing constraints?, "Journal of Banking and Finance", 49, 495-505, 2014.
• Sahay, R., Cihak, M., N'Diaye, P., Barajas, A., Bi, R., Ayala, D., Gao, Y., Kyobe, A., Nguyen, L., Saborowski, Ch., Svirydzenka, K., Yousefi, S.R., Rethinking Financial Deepening: Stability and Growth in Emerging Markets, IMF Staff Discussion Note, No. 15/08, 2015.
• Sainy, R., A study of factors affecting stock price volatility: Perception of stock brokers, "Intercontinental Journal of Finance Research Review", 4, pp. 1-10, 2016.
• Schumpeter, J. A., A Theory of Economic Development. Harvard University Press, Harvard 1911.
• Sethi, D., Acharya, D., Financial inclusion and economic growth linkage: Some cross country evidence, "Journal of Financial Economic Policy", 10, pp. 369-385, 2018.
• Sethi, D., Sethy, K., Financial inclusion matters for economic growth in India: Some evidence from cointegration analysis, "International Journal of Social Economics", 46, pp. 132-151, 2019.
• Seven, V., Hakan, Y., Financial intermediation and economic growth: Does income matter?, "Economic Systems", 40, pp. 39-58, 2016.
• Shan, J., Morris, A. G., Sun, F., Financial development and economic growth: an egg-and-chicken problem?, "Review of International Economics", 9, pp. 443-454, 2001.
• Shaw, E., Financial deepening in economic development. Oxford University Press, New York 1973.
• Solow, R. M., A Contribution to the Theory of Economic Growth, "Quarterly Journal of Economics", 106, pp. 327-368, 1956.
• Soto, M., System GMM estimation with a small sample, Barcelona Economics Working Paper Series, No. 395, 2009.
• Stiglitz, J. Capital market liberalization, economic growth and instability, World Development, 28, pp. 1075-1086, 2000.
• Valickova, P., Havranek, T., Horvath, R., Financial development and economic growth: A meta-analysis, "Journal of Economic Surveys", 29, pp. 506-526, 2015.
• Vojinovic, B., Oplotnik, Z. J., Real Convergence of GDP per Capita in the New EU Member States, "Transformations in Business and Economics", 7, pp. 89-103, 2008.
• Zhou, Q., Faff, R., Alpert, K., Bias correction in the estimation of dynamic panel models in corporate finance, "Journal of Corporate Finance", 25, pp. 494-513, 2014.

Identyfikatory

DOI

10.15611/aoe.2020.2.01