The Finance-Growth Nexus and the Role of Institutional Development: A Case Study of the Western Balkan Countries

Smolo, Edib

doi:10.1007/978-3-031-17767-5_2

Cited by 1 publication

(4 citation statements)

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“…It is only in Models 3 and 5 that financial developmentas measured by LL and M3has a significantly negative impact on economic growth. This could be due to the inefficient use of these resources by borrowers or due to inefficient institutions within these countries that may cause inefficiency of financial institutions (Smolo, 2021(Smolo, , 2022Smolo et al, 2021). The significant coefficients of the lagged dependent variable imply the persistence of economic growthfrom 0.344 in the case of liquid liabilities to 0.380 in the case of private credit.…”

Section: Resultsmentioning

confidence: 99%

“…It is only in Models 3 and 5 that financial development – as measured by LL and M3 – has a significantly negative impact on economic growth. This could be due to the inefficient use of these resources by borrowers or due to inefficient institutions within these countries that may cause inefficiency of financial institutions (Smolo, 2021, 2022; Smolo et al , 2021).…”

Section: Resultsmentioning

confidence: 99%

“…In other words, there might be other factors more important for economic growth than financial development that needs to be addressed appropriately. For instance, it is worth investigating the effect of institutional development in these countries moderating the finance-growth nexus (Smolo, 2021(Smolo, , 2022. Furthermore, it may be the case that financial development requires channels to contribute to growth, as suggested by Yang (2019).…”

Section: Discussionmentioning

confidence: 99%

“…A number of studies show that the finance-growth relationship is not as straightforward as generally found in the literature. For example, De Gregorio and Guidotti (1995), Fernandez and Galetovic (1994), Luintel and Khan (1999), Ram (1999), Andersen and Tarp (2003), Favara (2003), Naceur and Ghazouani (2007), Hsueh et al (2013), Carr e and L'óillet (2018) and Smolo (2020Smolo ( , 2022 show that the causal relationship between financial development and economic growth is sensitive to the use of financial development indicators and the adoption of econometric techniques and sample periods. Finally, Lucas (1988) asserts that economic growth is not responsive to financial sector development, implying no causal relationship between finance and growth.…”

Section: Literature Reviewmentioning

confidence: 99%

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Finance – growth nexus: evidence from systemically important Islamic finance countries

Smolo

Nagayev

2023

JIABR

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Purpose The purpose of this study is to examine the effects of financial development on the economic growth of jurisdictions with systemically important Islamic finance. Design/methodology/approach The authors use several estimation methods. The primary analysis is based on the LSDVC method using a sample of 23 countries covering the period of 2000–2019. Findings The findings suggest that the financial sector may not be a significant factor in determining economic growth, or that it may decrease it depending on the proxy used. These results are in line with recent studies and robust across different estimation specifications and methods used. Practical implications Finance practitioners may reconsider the way they conduct their daily activities as their impact on economic growth is fading away. Similarly, policymakers should consider the role that financial development plays in economic growth alongside other factors that may influence its impact. It may be necessary to examine the moderating effects of institutional development on the relationship between finance and growth and consider the channels through which financial development can contribute to economic growth. Additionally, it would be useful to study the impact of Islamic finance on economic growth using different data sources. Originality/value Although the topic has been explored using different data sets and focusing on different samples, it has not been explored considering the impact of Islamic finance development on economic growth. Given the global appeal of the Islamic finance industry, it is worth investigating its significance for economic growth.

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Section: Resultsmentioning

confidence: 99%

Section: Resultsmentioning

confidence: 99%