The impact of financial risks on economic growth in EU-15

TL;DR

This study analyzes how financial risks influence economic growth in the EU-15 from 1995 to 2014, proposing a new explanatory model based on behavioral responses to financial disruptions.

Contribution

It introduces a novel explanatory model of economic growth that incorporates behavioral reactions to financial risks in the EU-15.

Findings

Financial risks negatively impact economic growth.

The new model explains growth variations better than previous models.

Behavioral responses are significant in financial disruptions.

Abstract

This paper examines the impact of financial risks on economic growth in the first 15 Member States of the European Union, considering 1995-2014 period and aims to lay down a new explanatory model of economic growth, based mainly on the behavioral reactivity of the financial disruptions mentioned above. The model was estimated through the panel estimated generalized least squares method and included additional control variables in order to strengthen the research conducted. Our goal consists in the examination of the financial risks in the European Union and in the estimation of their impact on economic growth.