The Euro-Adoption Effect and the Bank, Market, and Growth Nexus: New Evidence from EU Panels

The Euro-adoption effect and the bank, market, and growth nexus: New evidence from EU panels AG Georgantopoulos, AD Tsamis, MEK Agoraki The Journal of Economic Asymmetries 12 (1), 41-51, 2015

Posted: 3 Jul 2019

See all articles by Andreas G. Georgantopoulos

Andreas G. Georgantopoulos

National and Kapodistrian University of Athens; Panteion University of Athens - Panteion University of Political and Social Sciences

Anastasios Tsamis

Panteion University of Athens

Maria-Eleni Agoraki

Panteion University of Athens - Panteion University of Political and Social Sciences

Date Written: July 2, 2015

Abstract

This study investigates the financial system–growth relationships for a panel that includes the twenty-eight member states of the European Union (EU) for the period 1999–2012. Considering that the Euro currency is currently adopted by only seventeen member states, the originality of this paper lies in that it assesses, for the first time in related literature, the financial system–growth nexus by dividing the full EU28 sample in two new panels, the Eurozone panel and the non-Euro countries panel. The basic argument behind this sample split is that the Euro-adoption prerequisites closer and more centralized political, economic, fiscal and financial cooperation between the Eurozone members and therefore different relationships may exist, from a finance–growth perspective, due to greater sample uniformity. To assess these relationships, the differenced and the system Generalized-Methods-of-Moments (GMM) estimators are employed. The empirical findings derived from the full EU countries panel fail to support the bank-led growth hypothesis. However, stock markets are reported as weak but significant growth factors. From the Eurozone panel, strongly significant results are reported, documenting the contribution of the financial sector on growth. Finally, from the non-Euro countries panel, findings imply the significant negative impact of the banking sector on growth. Overall, these results could suggest that testing these relationships under the Euro-adoption criterion can indeed lead to different results. Policymakers should further improve the banking/financial regulatory framework, the credit allocation process and the banking competition in order for the financial system to promote EU’s economic development in more efficient ways.

Keywords: Panel data, European Union, Economic growth, Banks, Stock markets, GMM estimator

Suggested Citation

Georgantopoulos, Andreas G. and Tsamis, Anastasios and Agoraki, Maria-Eleni, The Euro-Adoption Effect and the Bank, Market, and Growth Nexus: New Evidence from EU Panels (July 2, 2015). The Euro-adoption effect and the bank, market, and growth nexus: New evidence from EU panels AG Georgantopoulos, AD Tsamis, MEK Agoraki The Journal of Economic Asymmetries 12 (1), 41-51, 2015, Available at SSRN: https://ssrn.com/abstract=3413654

Andreas G. Georgantopoulos (Contact Author)

National and Kapodistrian University of Athens ( email )

Greece

Panteion University of Athens - Panteion University of Political and Social Sciences ( email )

136 Sygrou
Athens
Greece

Anastasios Tsamis

Panteion University of Athens ( email )

Athens
Athens 117 45
Greece

Maria-Eleni Agoraki

Panteion University of Athens - Panteion University of Political and Social Sciences ( email )

136 Sygrou
Athens
Greece

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