The Financial and Institutional Environment for Sustainable Economic Growth of Developing Countries: the Case of Western Balkan
The Financial and Institutional Environment for Sustainable Economic Growth of Developing Countries: the Case of Western Balkan

Author(s): Jelena Stanković, Evica Petrović, Ksenija Denčić-Mihajlov
Subject(s): National Economy, Developing nations, Economic development
Published by: Masarykova univerzita nakladatelství
Keywords: financial development; institutional development, sustainability; economic growth; developing countries;
Summary/Abstract: The economic growth and its sustainability have attracted significant interest of academics and policy makers in recent decades. Faster economic growth observed in developing countries has been associated with capital mobility. Therefore, the first aim of this study is to examine the finance-growth link and effectiveness of financial systems in promoting sustainable economic growth in developing countries. On the other hand, developing countries have experienced vast changes in their economic and institutional environment in order to integrate with the world economy. Thus, the second aim of this study is to examine the quality of the institutional environment and its role in providing conditions for sustainable growth in developing countries. The proposed analyses are conducted on the sample of Western Balkan countries using indicators provided by the World Bank database. According to the results of panel data analysis the level of financial development, especially the level of banking sector development, significantly influences the level of economic growth. It can be concluded that international capital flows are not the main determinant of the growth rate of GDP in observed developing countries as well as that financial development leads to economic growth.

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