The effect of financial stability on economic growth: Panel data analysis

In today's world, the relationship has been widely discussed between financial development and economic growth, in other words, the relationship between the financial sector and the real sector. Financial development is defined as increasing the diversity of financial instruments in the financial market and using financial instruments more often. Financial development includes 4 parameters: financial deepening, financial stability, financial access and effectiveness. Financial stability, one of the elements of financial development is the state in an economy that the financial system is able to withstand the shocks without causing processes that impair the transmission of savings to investments and without damaging the payments system. In this study, the impact of financial stability as one of the components of financial development on economic growth was analyzed and compared each other covers developed and developing countries between the period 1996-2019 using panel data analysis technique. As a result of the study; it has been conducted with two different panel data sets in the same time dimension using the same variables; financial stability has a positive effect on economic growth for developed countries, but not significant model able to obtain for developing countries.