Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/323175 
Year of Publication: 
2025
Citation: 
[Journal:] Ekonomika [ISSN:] 2424-6166 [Volume:] 104 [Issue:] 1 [Year:] 2025 [Pages:] 139-163
Publisher: 
Vilnius University Press, Vilnius
Abstract: 
This study rigorously examines the causality between banking development, economic growth, and income inequality using annual panel data for 13 Central Eastern European transition economies from 2000 to 2020. The Granger non-causality test of heterogeneous panels based on the Toda and Yamamoto approach is employed for the empirical analysis. The main findings establish a trivariate causal relationship between financial development, economic growth, and inequality. In particular, the banking development measured by private credit provided by the financial sector and liquid liabilities Granger causes economic growth, and economic growth Granger causes income inequality. Based on the results, policy implications in European transition economies should focus primarily on expansion and banking system reforms so that to improve financial services, leading to enhanced economic growth. The boosted economic activity could ameliorate income inequality and improve social welfare.
Subjects: 
economic growth
financial development
inequality
trivariate panel causality
CEE countries
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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