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Relevance of the EU Banking Sector to Economic Growth

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Abstract

Using panel estimates and a sample including all 28 European Union (EU) countries, this paper seeks to improve upon the existing literature with empirical evidence on the role that banking institutions can play in promoting economic growth. Banking sector performance is proxied by relevant operational, capital, liquidity and asset quality financial ratios. Economic growth is represented by the annual gross domestic product (GDP) growth rate. The estimations take into account the recent international financial crisis and consider three panels: one for the time period 1998–2012, a second one for the years before the crisis (1998–2006) and another for the subinterval 2007–2012. The results allow us to draw conclusions not only about the importance of the various financial ratios to economic growth but also regarding reactions to the recent crisis.

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Acknowledgements

The author would like to thank the participants at the 81st International Atlantic Economic Conference, 16-19 March 2016, Lisbon, and particularly Professor Reinhard Neck as well as the Editor-in Chief and the anonymous referee(s) for their most helpful comments, critics and suggestions. The usual disclaimer remains. Financial support by FCT (Fundação para a Ciência e a Tecnologia), Portugal is gratefully acknowledged. This article is part of the Strategic Project (UID/ECO/00436/2013).

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Correspondence to Cândida Ferreira.

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Ferreira, C. Relevance of the EU Banking Sector to Economic Growth. Int Adv Econ Res 23, 203–215 (2017). https://doi.org/10.1007/s11294-017-9632-1

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