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InterEULawEast : Journal for the international and european law, economics and market integrations, Vol. 10 No. 1, 2023.

Review article

https://doi.org/10.22598/iele.2023.10.1.11

FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH: EVIDENCE FROM WESTERN BALKAN COUNTRIES

Argjira Bilalli orcid id orcid.org/0000-0003-0215-5631 ; Faculty of Business and Economics, Southeast European University, Tetovo, North Macedonia
Artenisa Beka orcid id orcid.org/0000-0001-8358-1311 ; Faculty of Business and Economics, Southeast European University, Tetovo, North Macedonia
Atdhetar Gara orcid id orcid.org/0000-0003-4341-7802 ; Faculty of Business and Economics, Southeast European University, Tetovo, North Macedonia

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Abstract

This research paper aims to empirically analyze the relationship between economic growth and financial development, in the region of Western Balkan countries, over the period 2010–2020. The relationship is demonstrated by the effects of independent variables such as trade (T), inflation consumer prices (ICP), general government final consumption (GGFCE), domestic credit to the private sector (DCPS), broad money (BM), and the real interest rate (IR), on the dependent variable, such as GDP growth. Hence, to evaluate this impact, we employed the regression model. Although, a correlation matrix is presented to identify the relationship between the study variables. Based on the results presented, there is a positive relationship between trade, inflation rate, and interest rates. Additionally, based on the regression results that were produced using the fixed effect technique, it can be seen that trade (T), inflation (ICP), interest rates (IR), and domestic credit to the private sector (DCPS), positively impact economic growth. The main objective of this paper is to contribute to a better understanding of this connection and draw new conclusions that might greatly benefit policymakers and the Western Balkan community, by considering the fundamental role of the financial sector in sustainable economic growth. The study’s second objective is to fill the vacuum in the literature for this period and a sample of counties according to specific macroeconomic variables.

Keywords

financial development; economic growth; inflation consumer prices; real interest rates; broad money; domestic credit to the private sector; general government final consumption; trade; Western Balkan

Hrčak ID:

305543

URI

https://hrcak.srce.hr/305543

Publication date:

30.6.2023.

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