Page 20 - Azerbaijan State University of Economics
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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.





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