Financial development and economic growth: New evidence from a sample of island economies

Abstract

Purpose

The purpose of this paper is to test the hypothesis that there exists a positive link between financial development and economic growth in island economies.

Design/methodology/approach

To study this relationship both static and dynamic panel data techniques (GMM) are used for a sample of 20 island economies over a period of 22 years.

Findings

Results from the fixed effect estimates show that financial development has a positive contribution on the output level of the islands. The positive link is also validated using GMM panel estimates and interestingly the presence of dynamics in the modelling is detected.

Originality/value

This research narrows the gap that exists in literature as much of the research in this field deals with only developed countries and very few with developing countries. To the best of the authors' knowledge, no studies have looked into a set of island economies – this study is the first of its kind.

Citation

Seetanah, B., Ramessur, S.T. and Rojid, S. (2009), "Financial development and economic growth: New evidence from a sample of island economies", Journal of Economic Studies, Vol. 36 No. 2, pp. 124-134. https://doi.org/10.1108/01443580910955033