An Examination of Financial Development Effect on OIC member countries

In this study, we examine financial development effect on the economic growth of Organization of Islamic Conference (OIC) member countries. For this, we have estimated convergence-growth equation by using powerful panel technique, two stage least square method and generalized moments technique during ۱۹۸۰-۲۰۰۴. The results indicate the positive effect of financial development on economic growth of OIC member countries. Furthermore, based on all estimations, financial development created by private sector has greater effect on economic growth compared to that of banking system. In these countries, economic growth motives are very weak, while obstructive elements in front of economic growth are more powerful. As a general result, one can say that these countries settle in proximity of steady state level, but due to the level differences among OIC member countries, there is a large difference between their per capita gross domestic product. Countries with larger financial development, bigger trade openness, larger physical and human investment rate, larger labor growth rate and smaller government size, could experience higher growth during this period.