THE IMPACT OF FINANCIAL DEVELOPMENT ON ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM SELECTED DEVELOPING COUNTRIES
DOI:
https://doi.org/10.53840/ijiefer247Keywords:
Financial Development, Economic Growth, Generalised Method of Moments, Developing CountriesAbstract
Financial development and economic growth are among central themes of current macroeconomic literature, the relationship between the two-remaining ambiguous, especially in developing countries with horrendously inefficient financial institutions. This study has analyzed the effect of financial development on economic growth in selected developing countries during the period from 2000 to 2022. The techniques of the GMM are employed in this paper using some domestic credit given to the private sector (DCPS) and broad money (M3) as pro-transform economies for measuring financial development along with the control variables such as population growth, human capital, government expenditure, and private investment. The results of the study show that both DCPS and M3 have a significant and positive effect on growth, but even this impact is stronger for DCPS. The results indicate that in fostering sustainable growth, the utmost importance is actually given to efficient credit allocation as well as deeper financial intermediation. The study emphasizes that inclusive financial systems as well as expansionary monetary policies are important for enhancing access to credit and stimulating investment in developing economies.
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