Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE Countries

Sustainability (MDPI Open Access), 2017, 9(3), 335; doi:10.3390/su9030335

25 Pages Posted: 12 May 2017

See all articles by Paola Bongini

Paola Bongini

Università degli Studi di Milano-Bicocca

Malgorzata Iwanicz-Drozdowska

Warsaw School of Economics, Institute of Finance

Paweł Smaga

Warsaw School of Economics (SGH) - Department of Finance and Management; National Bank of Poland

Bartosz Witkowski

Warsaw School of Economics (SGH)

Date Written: March 3, 2017

Abstract

This study focuses on the role of financial development in the economic growth of Central, Eastern and South-Eastern European (CESEE) countries in the post-communist era (1995–2014), which coincides with the opening up of financial markets to foreign investors and the global financial crisis. We investigate whether economic growth in CESEE countries has benefited from the presence of foreign-owned banks. To this end, we introduce some refined measures of financial development and control for banks’ financial strength. Our results challenge the idea that bank credit fosters economic growth and that foreign-owned banks are indisputably a positive addition to local markets able to foster economic growth.

Keywords: financial development; economic growth; foreign-owned banks; post-communist economies

JEL Classification: O11, O16, E44, F36, F43, G00

Suggested Citation

Bongini, Paola and Iwanicz-Drozdowska, Malgorzata and Smaga, Paweł and Witkowski, Bartosz, Financial Development and Economic Growth: The Role of Foreign-Owned Banks in CESEE Countries (March 3, 2017). Sustainability (MDPI Open Access), 2017, 9(3), 335; doi:10.3390/su9030335, Available at SSRN: https://ssrn.com/abstract=2966678

Paola Bongini

Università degli Studi di Milano-Bicocca ( email )

piazza dell'Ateneo Nuovo 1
Milano, 20126
Italy
+39 0264483012 (Phone)

Malgorzata Iwanicz-Drozdowska (Contact Author)

Warsaw School of Economics, Institute of Finance ( email )

Warsaw
Poland

Paweł Smaga

Warsaw School of Economics (SGH) - Department of Finance and Management ( email )

Warsaw
Poland

National Bank of Poland ( email )

Poland

Bartosz Witkowski

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

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