Business & Economics
The Macroeconomic Environment, Financial Development, Technology and Growth: Evidence from the Accession to the EU
This paper finds that macroeconomic structural reforms have significant positive impacts on economic growth through financial development and information and communications technology (ICT). We investigate eight Central and Eastern European countries that recently joined the EU. To secure macroeconomic stabilization, the countries have gone through privatization, harmonization, and adjustments of convergence criteria, such as price stability, credible interest rates, stable exchange rates, and sustainable public finances. This unique experience eliminates endogeneity problems. We estimate a system of simultaneous equations for GDP growth, financial development, and investment in telecommunications technology (TT) by using a panel GMM estimation technique. We also find that financial development has significant positive impact on TT, and that, surprisingly, TT indirectly contributes to financial development through economic growth. As general policy implications, emerging countries should promote financial development, support TT, improve their legal systems and transparency, and implement proper monetary and fiscal policies.