The relationship between financial openness and economic growth in developed and developing countries: A panel data analysis

In this study, the relationship between financial openness and macroeconomic indicators is examined by panel data analysis method. The method used in the study is the DumitrescuHurlin Test and the Panel ARDL Model, which shows whether financial openness has an explanatory power on economic growth. In the study, the existence of a causal relationship between financial openness and economic growth in both developed and developing countries for the period 1995-2018 has been revealed. According to the panel ARDL results, in the long run, increases in the degree of financial openness affect economic growth negatively in developed country economies, while financial openness has a positive effect on economic growth for developing countries. While the level of financial openness has a positive effect on trade openness and large money supply for the two country groups, an increase in the level of financial openness in the developing countries group affects private sector loans negatively. Keywords: Financial openness, economic growth, trade openness and financial liberalization