Banks, stock markets and economic growth in high-income OECD: An empirical investigation

Abstract

This study examines the 21 high income OECD countries to explore the effect of financial development on economic growth in the highest stage of financial and economic development. In this paper, it was unable to find strong evidence that banking and stock market development increase the GDP per capita growth or sources of economic growth which are per capita capital stock growth and productivity growth in the high income countries. The existing literature also provides some findings about irrelevance of the financial development on economic growth in high income OECD countries by using different methodologies. The findings of this paper also show that banking development indicator is statistically significantly related to capital stock growth instead of productivity growth which is considered as the primary source of growth in the existing literature. Key words: Banks, stock markets, economic growth, OECD countries.