Financial Development and Economic Growth

The studies researching the existence of the relationship between financial development and economic growth are numerous and in order to get empirical evidences they use different data from different countries and periods of time.
The methodology on this field of research usually includes panel data studies, cross country studies, and time series studies. All of these methodologies refer to nature of data used.
Cross country approach usually brings up positive correlation between financial development and economic growth in a long run. A well-functioning and stable financial system does not always lead to over performing economy with constant growth.
Strong and efficient financial markets can influence growth in one country, but that does not have to be the case in some other country. The data for these types of studies are not always available so we cannot be sure if given results are completely right.
Furthermore, time series approach usually have one important limitation: the lack of available data. This is especially case for countries in developing stage.
Some of these studies proved that there is a positive correlation between financial development and economic growth. On the other hand, there are studies which also found out reverse casualty in developed countries.
In the panel data approach empirical evidences lead to conclusion that there is a positive relationship between financial development and economic growth is the most number of cases, but it also has some limitations which refer to evidence that this approach those not include all relevant variables into examination.

1 Introduction 4
2 Theoretical and empirical literature review 4
2.1 The causality direction in the empirical testing 7
3 Conclusion 10
4 References 11