Financial development, research in finance, and economic growth
Chadi Azmeh, Marwan Al‐Raeei
Abstract
This innovative study investigates the interplay between financial development, research output in finance, and economic growth across 15 MENA nations from 2000 to 2017. Utilizing the two-step system GMS method and the Runge-Kutta framework, the research defines and addresses a differential equation, achieving remarkable precision in economic modeling by fine-tuning step sizes and adapting the algorithm to the specific economic context. Key findings indicate that both the quantity and quality of research output in finance are crucial drivers of financial innovation, which fuels economic growth. The results reveal a significant positive influence of research output in finance on economic progress, highlighting the need to cultivate a research-centric environment for sustainable development. Furthermore, the study emphasizes the mutually beneficial relationship between financial development and research output in finance, demonstrating their collaborative effects on economic growth. Additionally, it uncovers a dynamic between financial stability and research quality, suggesting that while high-quality research may initially challenge stability, it ultimately supports enduring financial stability and economic growth. These insights underscore the necessity of investing in high-quality finance research and fostering collaboration among academia, industry professionals, and policymakers to spur financial innovation and drive economic success.