Financial development, export and economic growth: Panel data evidence from Commonwealth of Independent States

Abstract

This study focuses on the relation of four different financial development indicators and export performance, sampled from nine member states of the Commonwealth of Independent States, with economic growth for the period of 1995–2020. Its long-run relationship with PVAR analysis has been presented through VECM. The FMOLS and DOLS methods are used for the long-term coefficient estimates. According to the findings, there is a cointegration relationship between economic growth and export, and broad money, domestic credit to the private sector by banks, and monetary sector credit to private sector variables. The findings indicate that both financial development and export have a positive impact on economic growth. On the other hand, the findings have not presented sufficient evidence about the influence of the gross capital formation variable on economic growth while the monetary sector credit to private sector variable has been found to negatively affect economic growth. When the results of FMOLS and DOLS models are assessed together, it is concluded that export and financial development affects economic growth positively in the long term, but the first one’s effect is less.