ABSTRACT
Post-war countries need to achieve economic recovery and reduce the risk of future escalation. We focus on the economic recovery and investigate the role of the sector. We specifically examine the impact of financial development on post-war economic growth using Pooled OLS and multiplicative dummy variable regression technique based on a panel dataset of eight recent war-torn countries in the same era from 1970 to 2007 obtained from world bank data base. Our results show that financial development significantly and positively affects postwar economic growth, and this effect is greater than the effect during per-war and war periods. We also confirmed that other control variables such as trade openness are 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. 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.

Keywords: Financial development, economic growth, post-war, pooled OLS, multiplicative dummy regresssion.

Jel Classification: B26, F36, F65