How Global Financial Crisis affected the financial development and economic growth?

A growing body of theoretical and empirical literature analyses the relationship between finance and economic growth. The relationship has been strongly supported by many empirical analyses. However, Global Financial Crisis, 2008 and significantly improved econometric techniques made scholars to revisit this relationship. The main motivation of this paper is to empirically revisit the traditional financial development proxies relationship with economic growth after world’s second greatest financial crisis. In this study, both fixed effect and dynamic panel data analysis are conducted by using 147 countries over the period of 2000- 2013. The analysis results prove the destructive effect of GFC, 2008 on the relationship between financial development and economic growth. Also, the finding showed that the significance of traditional financial development proxies has lowered after the crisis.