The model holds that economic growth is primarily the result of endogenous and not external forces. Endogenous growth theory holds that investment in human capital, innovation, and knowledge are significant contributors to economic growth. The theory also focuses on positive externalities and spillover effects of a knowledge-based economy which will lead to economic development.
Published in Chapter:
Financial Development and Economic Growth: Panel Data Analysis
Filiz Eryılmaz (Uludağ University, Turkey), Hasan Bakır (Uludağ University, Turkey), and Mehmet Mercan (Hakkari University, Turkey)
Copyright: © 2015
|Pages: 13
DOI: 10.4018/978-1-4666-7288-8.ch015
Abstract
The relationship between financial development and economic growth has been the subject of considerable debate in development and growth literature. Therefore this chapter provides evidence on the role of financial development in accounting for economic growth in 23 OECD countries (Italy, Japan, Luxemburg, Holland, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, England, USA, Australia, Austria, Belgium, Canada, Denmark, Finland, Turkey, France, Germany, Greece, Iceland) via panel data analysis using the annual data for the period 1980-2012. The authors find a positive relationship between financial development and economic growth for all countries. Also this result means that financial development leads economic growth in these countries. So the results may help policymakers formulate effective financial sector policies as a tool to promote economic growth.