The relationship between financial development and economic growth in Lithuania

Abstract

This study is set out to explore the relationship between financial development and economic growth in Lithuania through application of causal analysis based on VAR models framework. Theoretical basis of the question and empirical results on the topic as well as research methods and measurements in the field are examined in the paper. Sample of six variables: GDP per capita, liquid liabilities, private credit, market capitalization, turnover ratio and value traded ratio covering the period 2000Q1-2013Q2 is utilized in the research. On the basis of obtained in the study evidence the authors conclude that the relationship between financial development and economic growth in Lithuania obeys the supply leading hypothesis meaning that there is the significant impact of Lithuanian financial development on country's economic growth.