Financial Deepening, Economic Growth and Unemployment: A Panel Data Analysis Worldwide (1995–2006)

Abstract

Present paper is an extension of Georgiou (2009) and the conclusion is indirectly explained by the view of (Wachtel and Rousseau, 2007), who claim that after 1995 credit to private sector as a percentage of GDP causes a decline in economic growth. Hence, in the present paper two things will be shown econometrically with panel data. First, that after 1995 credit to private sector as a percentage of GDP causes a decline in economic growth, thus supporting the view of (Wachtel and Rousseau, 2007); and second, that financial deepening has an optimum unemployment rate-wise, as initially supported by Georgiou (2009). The sample covers all world during the period 1995-2006. Data are drawn from World Bank and are elaborated by means of the Eviews software package.

Keywords: econometric models with panel data (single equation), Banking Credit, Unemployment, Economic Growth, Recession

JEL Classification: C23, E5, J6, O4