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Financial Development and Economic Growth in Developed Countries

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Abstract:

Financial development is one of the keys to the long-run economic growth. Since economic growth is one of the important goals of every country, the investigation of the causes of economic growth is vital so that planners and policy makers should pay attention to it. Economists traditionally focusing on the long-run relationship between financial development and economic growth have argued that the development of financial section by efficient resource allocation and financing innovative activities can support and boost economic growth. The relationship between financial development and economic growth is one of the macroeconomic relations which were investigated in empirical studies in Iran and other countries. Some economists believe that financial section has no effect on real section but the literature shows a strong relationship between financial development and economic growth. In this research the effect of indicators of financial development on economic growth of developed countries is investigated by using panel data in 10 chosen countries during 1997-2007. The results show that financial development indicator has an important effect on level of GDP, also other explanatory variables are statistically significant in economic growth. Therefore it can be said that supply of financial markets would boost economic growth.

Info:

Periodical:
International Letters of Social and Humanistic Sciences (Volume 36)
Pages:
75-81
DOI:
10.18052/www.scipress.com/ILSHS.36.75
Citation:
F. Ghamati and M. Mehrara, "Financial Development and Economic Growth in Developed Countries", International Letters of Social and Humanistic Sciences, Vol. 36, pp. 75-81, 2014
Online since:
Jul 2014
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