Abstract: This paper revisits the finance-growth nexus in Albania, providing an updated and more thorough empirical analysis of findings initially presented in previous research (2016). The original study revealed a statistically significant negative relationship between financial development and economic growth in Albania from 1994 to 2015, contradicting established beliefs. This study extends the time-series analysis to 2024 and utilizes a dynamic autoregressive distributed lag (ARDL) model to examine the persistence of the negative relationship while accounting for financial stability and institutional quality. The ARDL bounds test verifies a stable long-term cointegrating relationship among the variables. The results demonstrate that the adverse long-term correlation between financial development and economic growth has not only endured but is also substantial and highly significant. The analysis confirms that while trade openness is conducive to long-run growth, inflation has a significant negative impact. The study concludes that in Albania's post-transition context, the quality and efficiency of financial intermediation are more important than the amount of credit. These results show that we still need policies that focus on improving banking supervision to ensure that credit goes to investments that are productive and lead to long-term growth.

Keywords: Finance-Growth Nexus, Financial Development, Economic Growth, ARDL Model, Albania, Post-Transition Economies, Finance Without Function

Pages: 1107-1119