Relationship between Financial Freedom and Economic Growth: Panel Data Analysis for EU Countries

Abstract

In this study, the impact of financial liberalization on economic growth was investigated, based on the annual data of 28 EU Member States between 2005 and 2016. The analysis was conducted by Panel Data Analysis using five variables, Economic Growth Indicator (GDS), Real Interest Rate (RIR), Capital Accumulation (GFC), Portfolio Investments (PIN) and Foreign Direct Investment (FDI). While the results of the analysis show that the effects of direct foreign capital investments, portfolio investments and capital (investment) on economic growth are significant and positive, the effects of changes in interest rates on economic growth are insignificant.