The impact of financial development on economic growth: An econometric analysis for developing countries

In this thesis study, aims to investigate the impact of financial development on economic growth for developing countries including Turkey. At this point, firstly, the concept of economic growth, its importance, types and economic growth theories were examined within the scope of economic theory. In the second part, the literature on the concept, importance, types and instruments of financial development is presented. In the application of the study, the network of short and long-term relationships between financial development and financial institutions indices and economic growth were examined. In this framework, for the empirical analysis of the study, a panel data set covering the 1985-2021 period of 32 countries in the upper-middle income group, whose healthy data are accessible, has been created within the scope of financial development, financial institutions and economic growth variables. In the empirical analysis of the study, as an econometric methodology, Breusch Pagan LM (1980) test was applied to investigate the cross-section dependence in the series, and Pesaran (2004) first generation panel unit root test was applied to investigate the stationarity of the series after the existence of cross-section dependence was determined. After ensuring the stationarity of the series, Dumitrescu and Hurlin (2012) Granger Panel Causality test was applied to test the existence of short-run relationships between the series and Westerlund (2007) Panel Cointegration test was applied to test the existence of long-run relationships. As a result of the analysis, it is concluded that there is both a short-run and a long-run relationship between the GDP per capita series, which is an indicator of economic growth, and the financial development and financial institution development series, which are selected as indicators of financial development, for 32 upper-middle-income countries in the period 1985-2021. KEYWORDS: Financial Development, Financial Institutions, Economic Growth, Upper-Middle Income Group Countries, Panel Data Analysis.