Leasing, Credit and Economic Growth : Evidence for Central and South Eastern Europe

We investigate the role of leasing in the lending boom in Central and South Eastern Europe (CEE and SEE). We contribute by (1) providing a full picture of the financing situation in Eastern Europe, where leasing plays a more important role than elsewhere; (2) by investigating the finance-growth-nexus for ten Eastern European countries with a panel data approach over 1999-2006; (3) by extending the production function approach (credit, stock, bond) and the law-and-finance-view for leasing. We find that leasing and credit positively contributed to economic growth. However, leasing and credit are complements and not substitutes as suggested partly by previous research in other regions. We conclude that leasing cannot be used to circumvent proper regulation by policy makers or market participants, and that alternative forms of finance need to be included for a full picture of the finance-growth link