This article empirically investigates the relationship between stock market/banking sector development and economic growth by controlling for the effects of human and physical capital factors in a seasonal cointegration framework. We use a sample of quarterly and seasonally unadjusted data which covers the period 1965Q1–2011Q4. The results suggest that: (1) the UK financial sector development is a good promoter of the domestic economy both in the long- and the short-run; (2) the supply-leading hypothesis that causality runs from stock market capitalisation and stock market volatility to real GDP per worker is confirmed; (3) stock market volatility has a negative influence on the UK’s output, which may reflect economic ambiguity but may also reflect a well-functioning and efficient stock market; (4) if a country has a good infrastructure and a well-educated nation, it enhances economic growth as well as betters the financial sector (i.e. markets and banks); and (5) if a new global financial meltdown is formed, this can easily devastate the UK economy.

Although the literature on the contribution of tourism to economic expansion vis-à-vis the tourism-led growth hypothesis has been widely explored, so far, limited attention has been paid to the specificity of the role of tourism-related loans or financial inducement in economic growth. This paper examines the short-run and long-run relationships between bank loan disbursements to the tourism sector and economic growth in Northern Cyprus. We structurally derive empirical equations for co-integration and error-correction models by extending the original Solow growth model, applying a cointegration approach that is strengthened by the autoregressive distributed lag and Granger causality approaches to reveal important findings. The empirical findings suggest unidirectional causality from loans disbursed to the tourism sector to economic growth in Northern Cyprus for the period under study. Additionally, we show that tourism-related loans and human and technological advancement all spur economic growth in the short- and long-run. These findings’ main policy implication is that long-term complementary policies in the domestic banking system can increase the access to financial sources for tourism enterprises and, consequently, promote tourism-led economic growth, especially in small tourism-dependent economies where capital sources are scarce.