Banking sector development in CEE countries: panel data approach

Financial development has a major role in the sustainable economic growth of Central and Eastern European emerging countries, particularly after their political and structural changes. These changes required a reform of financial sectors of these countries, such as capital market development, banking privatisations and trade openness (TO). Moreover, emerging countries have opened too quickly to foreign competitors. Importantly, TO without financial openness is unlikely to contribute financial development. Therefore, this paper deals with banking sector analysis of the CEE emerging countries, which are still more bank based. Empirical results will show as which macroeconomic variables affect banking sector development in CEE countries. Different indicators of banking sector development will be used. Panel technique will be used to analyse panel data from 16 CEE countries during the period 1994–2007. Parameters of the panel data model will be estimated using GMM method.