Essays On Financial Market Development And Economic Growth

Essays On Financial Market Development And Economic Growth-80
The financial system is obviously also shaped by the development of non-financial sector.Its development pace and level depend on the individual country or regional economic conditions, including the institutional environment of the country, legal environment, political cycle etc.

The financial system is obviously also shaped by the development of non-financial sector.Its development pace and level depend on the individual country or regional economic conditions, including the institutional environment of the country, legal environment, political cycle etc.

The author makes an attempt herself to define the financial system, saying that it is the structure of “interconnected financial institutions, financial markets and elements of financial system infrastructure; through this structure, entities belonging to real environment (first of all households, enterprises and government) can source funding, invest savings and satisfy the rest of their needs relating to financial aspect of their functioning” (Matysek-Jedrych , p. Based on the analysis of publications across the span of several decades it is clear that the interest in the financial system is rising.

Research covers its different elements, as well as interrelations among them, and more often, especially as the result of the last crisis, the identification of risks for its stable and effective functioning, indicating, among others the occurrence of system risk.

The analysis covers the 28 EU and 34 OECD economies and the 1993–2013 period.

The following variables are used to measure the financial sector: domestic credit provided by financial sector, bank nonperforming loans, bank capital to assets ratio, market capitalization of listed companies, turnover ratio of stocks traded, and the monetization ratio.

Second, what is exactly the stability of the financial system and how can it be measured on the basis of statistical data?

The problems regarding the relationship between the financial sector and economic growth strengthened after the last global crisis and the crisis in the euro zone.This study aims to analyze the impact of the development and stability of the financial sector on economic growth on the basis of the quantitative methods that produce robust results.The following research hypotheses are tested: /H1/ The relationship between financial sector development (stability) and economic growth is nonlinear; /H2/ An excessively large size of the financial system does not lead to more rapid economic growth: it may even negatively affect GDP dynamics; /H3/ The inclusion of the post-crisis period gives new insights of the nature of the relationship between financial system and economic growth.The analysis covers the 28 EU countries and 34 OECD economies and the 1993–2013 period. They divide the financial system into the market one, constituting the mechanism of co-creation and flow of financial means, working then to the participation of private entities (financial institutions) and the public system, which in turn constitutes the mechanism assuring co-creation and flow of financial means allowing public government to provide public goods, services as well as public benefits.The following variables are used to measure the development and stability of the financial sector: domestic credit provided by financial sector, bank nonperforming loans, bank capital to assets ratio, market capitalization of listed companies, turnover ratio of stocks traded, and the monetization ratio. It is worth noting that definitions, which we encounter in different publications, have many common elements, complement each other rather than be mutually exclusive, but also stress different aspects of the financial system.It turns out that some disturbances observed in the financial sphere of the economy may exert very significant and long-term impact on the behavior of the real economy.The discussion of these issues is by no way closed.A new element of the empirical analysis as compared with the other studies on the subject is the application of the extended econometric and economic modelling.The new aspects include, among others, testing nonlinear relationships between financial development and economic growth, analyzing both levels and changes of the financial variables, as well as estimating the models on the basis of a moving panel with overlapping observations.The knowledge in this regard was broadened both from a theoretical perspective as well as from a practical point of view.It is difficult however to identify the common thought in it.

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