Sep 21, 2008

Articles in journals

Ferreira, C.

35

15

Purpose - This paper is a contribution to the study of the link between financial intermediation and economic growth in the context of the European Union and particularly in the context of the integration of new member-states. Design/methodology/approach - We use panel fixed and dynamic Arellano-Bond estimates (with balanced panels) to explain and compare the influence of financial intermediation with the real per-capita GDP growth in two sub-sets of EU countries: the first one takes into account the availability of quarterly data and comprises 11 “old” EU countries, excluding Luxembourg, Denmark, Ireland and Sweden, for the period between Q2 1980 and Q4 1998; the second panel includes 24 EU countries (excluding only Luxembourg) for the period between Q2 1999 and Q4 2002. We contribute to the existing empirical evidence by introducing some financial variables to explain the real per-capita GDP growth, namely, the real domestic credit growth, the real foreign liabilities growth, the real growth of the sum of the bonds and money market instruments, in addition to two ratios: bank assets/bank liabilities and domestic credit/bank deposits. Findings - The results obtained confirm the importance of these variables to the real per-capita GDP growth and allow us to draw conclusions on some differences in the behaviour and the level of integration of the two groups of EU countries. There is a relatively more homogenous behaviour in the first panel, while the results for the second panel indicate that, in spite of the relative heterogeneity and the differences in their historical evolution, all the countries have had to adapt rapidly to the increasing competition and to the new EU market conditions.

Financial systems,Financial integration,Panel estimates,European Union