Page 20 - Azerbaijan State University of Economics
P. 20
THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.80, # 2, 2023, pp. 14-27
Limitation of the study
Since this study investigate the role of financial development in postwar economic
growth in panel study of eight recent war-torn countries, it does not consider the length
of war for each specific countries and other countries specific effects will affects the
study results. As a result, for further researchers, we recommend replicating this study
at individual countries level.
DATA ANALYSIS AND CONCLUSIONS
In Table 1 we show the impact of financial development on the economic growth of
post war, war, and prewar period respectively using Pooled OLS regression technique.
The results revealed that financial development has a statistically positively
significant impact on post-war economic growth. However, we found that
insignificant relationship between financial development and economic growth in war
and prewar period. Also in column 2, column 3, and column 4 We show the strength
of financial development impact on economic growth through specifically controlling
monetary policy and other control variables and controlling both monetary and other
variables in the model, respectively. The results reveal that the impacts show strong
significant and positive when including monetary variables in the regression model
for post war economic growth, while weak and insignificant for war and prewar
period.
We also confirmed that trade openness is the only variable that drives economic
growth negatively in both post war, war, and prewar periods. The lending interest rate
affects postwar and war period economic growth negatively. While the central
government debt drives post and prewar economic growth negatively. The official
exchange rate, and domestic savings rates show a positive significant impact on the
economic growth of post war and war periods, respectively. Our study result also
shows that the gross national expenditure and foreign direct investment shows a
positive significant relationship with prewar economic growth.
In Table5 we run multiplicative dummy regression analysis. The first two models
show the results of the whole sampled periods from 1970 to 2007, We find that
financial development proxied by domestic credit provided to private sector % GDP
have a positive and statistically significant impact on economic growth. Similarly
official exchange rate, general government expenditure domestic saving and foreign
direct investment affects economic growth positively. While the money supply,
lending interest rate, and trade openness drive economic growth negatively. In column
3 and 4 we show the impact of financial development and economic growth when the
prewar period was used as a dummy variable.
20