Abstract:
This study investigates the relationship between finance sector development and
economic growth with the time series data for the period from 1990 to 2013. The
study uses the endogenous components of financial intermediation such as Broad
money supply, Credit to private sector and Credit provided by banks as explanatory
variables to predict the outcome of our dependent variable Per capita GDP.
Regression model is used to analyze the data. The findings of the study confirm the
existence of a weak positive relationship between financial sector development and
economic growth. It reveals the existence of the relationship between the dependent
variable per capita GDP and the three independent variables; credit provided to
private sector, credit provided by banks and broad money supply which implies that
the financial development of Sri Lanka has a weak relationship with the economic
growth of the country.
