An Econometric Analysis of Financial Development’s Effects on the Share of Final Consumption Expenditure in Gross Domestic Product

The main motivation of this thesis is to search about the connectionbetween certain indicator of financial development and the share of final consumption expenditures in Gross Domestic Product (GDP) in a chosensample of central and east European countries. The true indicator of financial development that is used for this aim is the share of final consumption expenditure in GDP. The model of consumption function will include an explanatory variables like real interest rate, Lagged value of the share of final consumption expenditure in GDP, the share of Money and quasi money in GDP, the share of Domestic credit offeredby banking in GDP, GDP per capita as constant Local Currency Unit and growth rate of GDP (annual %). The method which used for this analysis is pooled regression and the data collected from eight East European countries include Bulgaria, Czech Republic, Poland, Romania, Slovenia, Hungary, Ukraine, and Belarus between 1993 and 2011. Finally by analyzing the E-VIEWS results it will be clear that which variable has positive effect on the share of final consumption expenditure in GDP and which one has the negative effect and the significant and insignificant of these effects. Keywords:The Share ofFinal Consumption Expenditurein GDP, GDP Per Capita, Real Interest Rate, Money and Quasi Money, Growth Rate of GDP