This study investigates the relationship between the financial
development and the economic growth in Syria during the period
(1980-2010). The financial development was measured by the
credit granted to the private sector and the broad money M2
whereas the economic growth was measured by the real gross
domestic product per capita.
Economic literature has shown the important and prominent role of financial
development in economic development and growth, through the effective pooling and
allocation of national savings towards investments in support of economic development.
He
nce, it is highly important to look for the real determinants of financial development.
This study investigates the determinants of the financial development of Syria, Lebanon
and Jordan for the period between 1995 and 2014, by applying the method of Ordinary
Least Squares (OLS), to a set of determinants adopted in previous studies. The study found
a statistically significant effect of only three of the nine determinants tested on the level of
private credit by depository institutions (financial sector activity). It also concludes a
statistically significant effect of only five determinants on the level of Liquid Liabilities
(financial sector size). The determinants are: inflation, bank concentration, rule of law,
control of corruption, contract enforcement and improving supervision of banks. Reforms
that contribute in reducing corruption, enforcing contracts, improving the rule of law,
improving supervision on banks, reducing the level of inflation and the level of bank
concentration, are the most important factors that we need to focus on in the long run, to
achieve financial development (size and activity).This in turn contributes to real economic
development in Syria, Lebanon and Jordan.
