Financial Stress and Economic Growth: The Moderating Role of Culture and Trust

44 Pages Posted: 19 Mar 2020

See all articles by Panagiota Makrychoriti

Panagiota Makrychoriti

Birkbeck ,University of London

Fotios Pasiouras

GSCM-Montpellier Business School

Menelaos Tasiou

University of Portsmouth

Date Written: February 23, 2020

Abstract

Using a sample of EU countries over the period 2002-2018, we find that a national culture of uncertainty avoidance and trust has a conditional role in the interplay between financial stress and economic growth. However, the cultural dimension of individualism does not appear to influence this relationship. By dis-aggregating the GDP into its four main components, we find that the moderating effect of uncertainty avoidance and trust flows through consumption and investments. The results also show that, during the global financial crisis, the moderation effect of trust is weaker in magnitude, whilst that of uncertainty avoidance is reinforced. Finally, by adopting a North-South EU divide perspective, we find that the results are mainly driven by the latter cluster of countries.

Keywords: Financial Stress, Culture, Psychology, Economic Growth

JEL Classification: G21, E71, O47

Suggested Citation

Makrychoriti, Panagiota and Pasiouras, Fotios and Tasiou, Menelaos, Financial Stress and Economic Growth: The Moderating Role of Culture and Trust (February 23, 2020). Available at SSRN: https://ssrn.com/abstract=3543188 or http://dx.doi.org/10.2139/ssrn.3543188

Panagiota Makrychoriti (Contact Author)

Birkbeck ,University of London ( email )

WC1E 7HX
London, Malet St,
United Kingdom

Fotios Pasiouras

GSCM-Montpellier Business School ( email )

2300, Avenue des Moulins
Montpellier, 34185
France

Menelaos Tasiou

University of Portsmouth ( email )

University House
Winston Churchhill Avenue
Portsmouth, Hampshire PO1 2UP
United Kingdom

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