Determinants of Economic Growth in the European Union Countries

This paper reassesses the long-debated relationship between the financial system development and economic growth. We use not only indicators for financial access, efficiency, stability and depth of the bank-oriented financial sector, but we also consider Eurozone membership, corruption perception and competitiveness of countries to examine the determinants of economic growth. We apply a panel data approach to 27 European countries over the 2004–2017 period. By splitting the time span, we examine whether the effect of financial system development, Eurozone membership, corruption perception and competitiveness on economic growth is affected by the occurrence of financial and debt crises. Our results indicate that loans to private sector do not always support economic growth. Our research also reveals that corruption perception has a negative impact on economic growth, and so does membership in Eurozone during a crisis.