Edition: Lublin 2016
The paper presents the analysis of the impact of the development and stability of the financial sector on economic growth. The study covers 26 EU countries and the 1993-2013 period. We include four financial sector variables: domestic credit to private sector, non-performing loans, market capitalization and number of listed companies. Main elements of novelty are: testing a nonlinear relationship between financial sector development and economic growth, the inclusion of a moving panel with 5-year overlapping sub-periods, and the robustness analysis for various subgroups of countries. Our results demonstrate that domestic credit and market capitalization of listed companies both have a nonlinear impact on economic growth reflected by a downward sloping parabola. Non-performing loans exhibit a clear negative influence on GDP dynamics.