Leasing, Credit and Economic Growth: Evidence for Central and South Eastern Europe

Abstract

Credit and its vast growth in transition economies attracted a lot of research while less attention was given to the even faster growth of leasing and the aggregate impact of financial market segments. Applying a panel data approach over 1999-2006, we investigate the finance-growth nexus (credit, stock, bond) for ten Eastern European countries with a production function and include leasing. We find that leasing and credit positively contributed to economic growth; we confirm on a broader basis that macroeconomic stability and a sound legal system are important preconditions for a positive impact of the financial sector; we find that leasing and credit are rather complements than substitutes and that taking alternative forms of finance like leasing into consideration is necessary for a full picture of the impact of finance.