Abstract
This chapter reviews the theoretical and empirical literature which links economic growth to the role and characteristics of the financial system. Among these characteristics, relevant to CESEE countries, stand the presence of foreign-owned banks and their activities in the host market. The chapter starts with a review of the main findings of the finance and growth theory and empirics; it then concentrates on specific findings for our group of countries. It finally reports the results of a series of studies targeting the role of foreign-owned banks in influencing the economic path of host countries.
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Notes
- 1.
The dataset contains annual data starting from 1980 for 176 advanced, emerging and low-income economies from the World Bank Global Financial Development database and World Bank FinStat, IMF’s Financial Access Survey, Dealogic corporate debt database, and Bank for International Settlements debt securities database.
- 2.
Only two studies investigate longer sample periods, though they are limited in the number of transition countries analysed.
- 3.
The Barro and Lee dataset provides educational attainment data for 146 countries in five-year intervals from 1950 to 2010. The educational attainment of the adult population over age 15 and over age 25 is provided at seven levels of schooling, from no formal education up to complete tertiary. The Penn World Tables provide an index of human capital per person, which is related to the average years of schooling and the rate of return to education; the average years of schooling are taken from the Barro and Lee dataset, while the assumed rate of return to education is based on Mincer equation estimates around the world.
- 4.
The rule of law index captures perceptions of the extent to which agents have confidence in and abide by the rules of society, in particular, the quality of contract enforcement, property rights and the courts, as well as the likelihood of crime and violence. The regulatory quality captures perceptions of the ability of the government to formulate and implement sound policies and regulations which permit and promote private sector development.
- 5.
Still, most studies on the stock market-growth nexus rarely include data from after the GFC and usually use data for only several CEE countries.
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Iwanicz-Drozdowska, M., Bongini, P., Smaga, P., Witkowski, B. (2018). Impact of Foreign-Owned Banks on Economic Development. In: Foreign-Owned Banks. Studies in Economic Transition. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-01111-6_6
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