Importance of Financial Sectors for Growth in Accession Countries

Presented at the ECB/OeNB/CFS-Conference on European Economic Integration, Vienna, November 2005

34 Pages Posted: 7 Mar 2005

See all articles by Gerhard Fink

Gerhard Fink

Dept of International Business and Trade

Peter R. Haiss

WU Vienna University of Economics and Business; UniCredit Bank Austria; IES Vienna - Institute for the International Education of Students

Goran Vuksic

Institute of Public Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 2005

Abstract

We use a production function approach in investigating the relationship between financial development and economic growth in 9 EU accession and new EU member countries during their transition period. Along with real capital stock growth, labor participation and educational attainment, we use aggregate measures of financial development as well as measures for single segments of financial sectors. To our knowledge in context of transition countries, bond markets are taken explicitly into account for the first time. This approach enables us to identify the segments of financial markets that contribute most to economic development of the EU accession countries. We find that the overall financial sector development, as well as two single segments - domestic credit and bond markets - stimulate economic growth in our sample. On the other hand, private credit and stock market capitalization are found to have no significant influence on growth. As for the other growth determinants, real capital stock growth turned out to be an important factor contributing to economic development, while labor participation and educational attainment did not play a significant role. We conclude that the impact of access to financial markets and bank loans on growth is different for private and public sectors. Development of financial market segments with stronger links to the public sector has stimulated economic growth.

Keywords: finance-growth, EU-accession countries, production function, credit, bond, stock markets, private/public finance

JEL Classification: C23, G10, G21, H74, O11, O6, O52

Suggested Citation

Fink, Gerhard and Haiss, Peter R. and Vuksic, Goran, Importance of Financial Sectors for Growth in Accession Countries (November 2005). Presented at the ECB/OeNB/CFS-Conference on European Economic Integration, Vienna, November 2005, Available at SSRN: https://ssrn.com/abstract=676321 or http://dx.doi.org/10.2139/ssrn.676321

Gerhard Fink

Dept of International Business and Trade ( email )

Welthandelsplatz 1, Building D1
Wien, 1020
Austria
+43/1/313364331 (Phone)

Peter R. Haiss (Contact Author)

WU Vienna University of Economics and Business ( email )

Institute for Production Management
Welthandelsplatz 1
Vienna, A-1020
Austria
++43-660 4848254 (Phone)
++43-50505 8944214 (Fax)

UniCredit Bank Austria ( email )

Rothschildplatz 1
Vienna, A-1020
Austria
++43-(0)50505 44214 (Phone)
++43-(0)50505 89 44214 (Fax)

HOME PAGE: http://www.bankaustria.com

IES Vienna - Institute for the International Education of Students

Johannesgasse 7
Vienna, A-1010
Austria

Goran Vuksic

Institute of Public Finance ( email )

Katanciceva 5
Zagreb, 10000
Croatia
++385 1 4886 444 (Phone)
++385 1 4819 365 (Fax)

HOME PAGE: www.ijf.hr

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
73
Abstract Views
1,094
rank
350,072
PlumX Metrics