The role of banking sector on the economic growth and sustainable economic development

Economic development, which is affected by many factors, is a very complex process. The factors having more important effects on this process are considered to be the most attractive issues for the researchers. The term Sustainable Economic Development, which has been used quite often recently, requires that economic, social, and environmental factors all together should be taken into consideration for the development process. According to this perception of development, next generation?s needs and production processes should also be taken into account while the present generation?s needs are fulfilled. Otherwise, a long-term real sustainable development can not be achieved.The relation between economic development and finance has been the major subject commonly searched and proven to have an importance in banking sector during the economic growth process . The aim of this study is to investigate the role of the banking sector on the sustainable development process and the relation between economic growth and the banking sector. In this context, static panel regression and dynamic panel causality analyses were used for a group of countries from the developing countries. The mentioned analyses were also used for another group of countries from the OECD countries. Annual data were used for the periods of 1980-2010, 1990-2009 and 2000-2009 respectively. In addition, the Toda Yamamoto causality test was used for Turkey using annual data for the years between 1981- 2009.This study comes up with the finding of the fact that banking sector has a positive role in the economic growth and sustainable economic development for developing countries , OECD countries and for Turkey as well.Key Words: Sustainable Economic Development, Banking Sector, Sustainable Human Development Index, Panel Data Forecasting, Time-Series Analysis