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Through which ways does financial development impact economic growth? 

Volatility (finance)
Cointegration
Distributed lag
Generalized method of moments
Quality (philosophy)
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Financial development impacts economic growth through various channels. It is found that the quality of financial development can promote economic growth, while the quantity of financial development may have an inhibitory effect on economic growth, especially in emerging countries. Additionally, a well-functioning financial market is crucial for achieving expected economic growth, with the positive effect of financial development on economic growth being magnified when institutions like the rule of law, political stability, and regulatory quality are effective. In the case of China, financial development is shown to cause economic growth in the long run, although not significantly in the short term. Moreover, in Syria, financial development has a favorable and statistically significant impact on economic growth in both the short and long terms, with factors like the legal system and government expenditure also influencing economic growth positively.

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Papers (5)Insight
Open access•Journal Article•DOI
Modeling and Analyzing the Dynamic Impact of Financial Development on Economic Growth in Syria
Abdullah Mohammad Ghazi Al Khatib, Pradeep Kumar Mishra 
25 Dec 2022-Eonomic affairs
Financial development impacts economic growth through enhancing national flexibility, mobilizing savings, improving resource allocation, diversification, risk management, information sharing, and financial stability, leading to overall economic progress.
Open access•Journal Article•DOI
The effect of financial development on economic growth in high-income countries
Akmil Ikhsan, Alpon Satrianto 
10 Mar 2023-Asian Economic and Financial Review
Financial development impacts economic growth by mobilizing capital, enhancing savings and investment channels, and strengthening financial institutions and markets, ultimately driving economic progress in high-income countries.
Journal Article•DOI
Impact of Financial Development on Economic Growth in Chinese Perspectives: ARDL Approach
Soojoong Nam, Guimin Lu 
31 Aug 2022-Bukbanggyeongjeyeon-gu
Financial development impacts economic growth positively in the long run, as per the ARDL analysis in China. However, no significant short-term impact was observed in the study.
Open access•Journal Article•DOI
The impact of financial development on economic growth in sub-Saharan Africa. Does institutional quality matter?
Grace Nkansa Asante, Paul Owusu Takyi, Gideon Agyei Mensah 
03 Feb 2023-Development studies research
2 Citations
Financial development positively impacts economic growth in sub-Saharan Africa. Institutional quality, including rule of law and regulatory effectiveness, amplifies this effect, highlighting the importance of supportive institutions for economic progress.
Open access•Journal Article•DOI
The Effect of Financial Development on Economic Growth and Economic Volatility
Weichen Chen
02 Mar 2023-BCP business & management
Financial development impacts economic growth through inhibitory effects from quantity but promotion from quality. It has a lesser impact on economic volatility, especially in emerging countries.

Related Questions

How Financial sector development affects economic growth?5 answersFinancial sector development significantly impacts economic growth by mobilizing capital and facilitating economic activities. Studies show that in high-income countries, a strong financial sector, including institutions and markets, plays a crucial role in driving economic growth by absorbing and distributing financial resources efficiently. Additionally, in sub-Saharan Africa, the quality of institutions mediates the positive effect of financial development on economic growth, emphasizing the importance of well-functioning financial markets. Furthermore, the banking sector's development in countries like Bosnia and Herzegovina directly influences GDP growth through increased loans to non-financial private sector firms. In BRICS nations, enhancing banking sector development and domestic investment is vital for bolstering economic growth, as evidenced by panel data analysis results. Anti-money laundering regulations also play a role, with a threshold effect observed on the finance-growth connection globally.
How does sustainable economic growth depend on financial development ?5 answersSustainable economic growth is influenced by financial development. Financial development plays a significant role in supporting sustainable economic growth by improving the efficiency of financial systems and providing access to capital. The relationship between financial development and sustainable economic growth is complex and multifaceted. It is influenced by factors such as institutional quality, technological innovation, and capital deepening. In the short run, institutional quality, financial development, and economic growth reinforce each other. In the long run, both institutional quality and financial development contribute to economic growth, with institutional quality having a greater positive effect. Financial globalization also plays a role in sustainable economic growth by providing access to external sources of capital, but it requires careful regulation and strong policies. Overall, financial development is essential for sustainable economic growth and requires attention to co-development policies and strategies.
How does financial development related to sustainable economic growth?5 answersFinancial development plays a crucial role in sustainable economic growth. It has been found that financial development contributes to improving sustainable economic growth through mechanisms such as capital deepening and technological innovation. Non-standard monetary policies, such as quantitative easing, have also been shown to have a positive impact on financial stability and development, as well as labor markets and markets for goods and services. Additionally, the relationship between financial development and carbon dioxide emissions has been studied, with findings suggesting that continued financial development initially increases emissions, but the square term of financial development reduces emissions, following an inverted U-shaped pattern. The Islamic financial sector, including Islamic banking and equity markets, has been found to have a significant and positive effect on sustainable economic growth in countries with large Muslim populations. Finally, the energy–finance–growth nexus has been explored, highlighting the importance of energy policies in maintaining a well-managed financial sector for sustainable economic growth.
What are the channels through which financial development affects economic growth?5 answersFinancial development affects economic growth through various channels. One channel is the mobilization of capital, which is necessary for economic activity and can be facilitated by a strong financial sector. Another channel is the development of the capital market sector, which has a positive impact on economic growth. Additionally, the banking sector and the stock market both play a role in driving economic growth. The functions of finance, such as the services rendered by the financial sector to the rest of the economy, also contribute to the transmission of the effect of financial development on economic growth. Overall, financial development has a significant influence on economic growth through these channels, emphasizing the importance of policy measures that promote the simultaneous development of the banking sector and the stock market.
How does capital in the financial system affect economic growth?5 answersCapital in the financial system can have both direct and indirect effects on economic growth. Higher bank capital ratios have been found to improve financial stability and lending activity, ultimately exerting a positive influence on economic activity. Integration of capital markets also has a positive impact on economic growth, with factors such as stock market capitalization, capital mobility, and foreign portfolio investment playing a significant role. On the other hand, financial capital flows can curb economic growth if not properly regulated. Therefore, stronger state regulation of financial capital and markets is proposed to direct financial capital towards boosting the real sector and becoming an economic booster. Higher bank capital requirements may have indirect effects on economic growth by affecting credit supply, bank asset risk, and the cost of bank capital. While these effects can potentially slow down economic growth, better-capitalized banks enhance financial stability by reducing risk-taking incentives and increasing buffers against losses.
What is the impact of accounting and finance on economic growth?5 answersAccounting and finance have a significant impact on economic growth. The activities of the financial sector, such as borrowing and equity trading, have been found to positively impact economic growth. However, excessive finance can lead to financial crises and harm economic growth. The role of financial development in economic growth differs across income levels. In low- and middle-income countries, banking development has a positive impact on economic growth, while in high-income countries, the impact is negative. Stock market development is positively associated with economic growth in both middle- and high-income countries. The impact of financing on economic growth is non-linear, with different sources and recipients of finances having varying effects. Overall, a well-functioning financial system is important for economic growth, but it is crucial to maintain a balance and avoid excessive finance.

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