XXV Edition

1-2 December 2016"

Financial Development and Economic Growth: the Role of Foreign-Owned Banks in Cesee Countries

Bongini Paola, University of Milan-Bicocca
Iwanicz-Drozdowska Małgorzata, Warsaw School of Economics
Smaga Paweł, Warsaw School of Economics and National Bank of Poland
Witkowski Bartosz, Warsaw School of Economics

Our paper focuses on the role of financial development in economic growth in CEESE countries considering a time span that covers the post-communist era – with its opening up of financial markets to foreign investors – and the impact of the global financial crisis. Our research question is as to whether CESEE countries have benefited from foreign-owned banks’ presence in terms of higher economic growth. We contribute to the long-lasting debate on finance and growth through the use of more refined measures of financial development and focusing on the potential role of foreign-owned banks in local markets. Our results challenge the idea that bank credit fosters economic growth and that foreign-owned banks are a source of innovation, with positive spillover effects.

Area: Banking

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

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