Financial Development and Economic Growth: An Empirical Investigation of three European Union Member - Countries

Antonios Adamopoulos
International Journal of Finance, Insurance and Risk Management, Volume 10, Issue 1, 3-24, 2020
DOI: 10.35808/ijfirm/204


Purpose: This paper investigates the relationship between financial development and economic growth for three European Union member countries, Greece, Ireland and UK. Design/Methodology/Approach: For this reason the existence of the long-run relationship between these variables applying the cointegration analysis is examined as suggested by Johansen and Juselious. Findings: Granger causality tests based on a vector error correction model (VECM) indicated that there is a causal relationship between financial development and economic growth in the three European Union’s member countries. Practical Implications: The Vector Error Correction specification forces the long-run behaviour of the endogenous variables to converge to their cointegrating relationships, while accommodates the short-run dynamics. Originality/Value: The study offers an in-depth insight into econometric modelling of economic growth.

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