Innovation, financial development and economic growth in Eurozone countries

Abstract

Using a panel vector auto-regressive model, we study interactions between innovation,
\nfinancial development and economic growth in 18 Eurozone countries between 1961
\nand 2013. We focus on whether causality runs between these variables both ways, one
\nway, the other way or not at all. Our empirical results show that development of the
\nfinancial sector and enhanced innovative capacity in the Eurozone contribute to longterm
\neconomic growth in the countries in the region.