Abstract. The objective of this paper is the empirical analysis of the relationship between financial development and economic growth in Central and Eastern Europe. Financial development is measured by broad money growth (annual%), domestic credit to private sector (% GDP), domestic credit to private sector (% GDP) annual growth, interest rate spread (lending rate minus deposit rate,%) and nonperforming loans (% total loans) and annual growth in GDP growth rates. Methodologically, we used a panel model for eight countries in Central and Eastern Europe for the period 1996 - 2011 (the date panel approach). The main conclusions of the paper are: (1) increase nonperforming loans and interest rate spreads negatively affect economic growth, (2) increase in domestic credit to private sector negatively affect GDP growth, but increase its growth rate positively affects GDP (3) broad money growth is less relevant for economic growth.

Keywords: financial development; economic growth; Central and Eastern Europe; nonperforming loans; interest rate spread.