Changing importance of financial sectors for growth from transition to cohesion and European integration

Fink, Gerhard and Haiss, Peter and Vuksic, Goran (2004) Changing importance of financial sectors for growth from transition to cohesion and European integration. EI Working Papers / Europainstitut, 58. Europainstitut, WU Vienna University of Economics and Business, Vienna.


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We use a production function approach in investigating the relationship between financial development and economic growth in 9 EU accession - mostly transition countries. These findings are compared with the results for the group of 18 developed countries, and separately, with the results for a group of less developed EU countries - structural fund recipients. We use aggregate measures of financial development as well as measures for single segments of financial sectors. In context of transition countries, bond markets are, to our knowledge, taken explicitly into account for the first time. We find that domestic credit and bond markets together with real capital stock growth stimulate economic growth in transition. With progress in cohesion, educational attainment becomes the next important factor that contributes to economic growth followed by labor participation in mature market economies. For the developed countries, financial sector did not play any positive role for growth over the period under study. We conclude that transfer mechanisms for growth differ over the development cycle. This is important to growth theory, to the sequencing of economic reforms and to financial sector development priorities. (author's abstract)

Item Type: Paper
Keywords: finance, educational attainment & growth / EU-cohesion and EU-accession countries / production function / credit, bond, stock markets
Divisions: Forschungsinstitute > Europafragen
Depositing User: Repository Administrator
Date Deposited: 30 Sep 2004 08:57
Last Modified: 22 Oct 2019 00:41


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