Financial Development and Economic Growth: A Case of Developing Countries

This study analyses the effect of financial development on economic growth in 64 developing countries during the period 2003–2017 using a Bayesian model averaging approach. The results indicate that financial development has a significant U-shaped effect on economic growth, providing new insight concerning the relationship between financial development and economic growth. We also demonstrate that investment to gross domestic product ratio and foreign direct investment have significant positive effects on economic growth, whereas population growth has a significant negative impact on economic growth.