Financial Stability, Monetary Policy, and Economic Growth: Panel Data Evidence from Developed and Developing Countries Moheddine Younsi 1 & Amine Nafla 2 Received: 3 April 2015 /Accepted: 1 February 2017 # Springer Science+Business Media New York 2017 Abstract This paper examines the relationship between financial stability, mone- tary policy, and economic growth in 40 developed and developing countries by using the annual panel data over the period of 1993–2015. Fixed and random effects panel data regression models were fitted to determine the impact of financial stability and monetary policy on economic growth. Our results indicate that trade openness, capital account openness, and foreign direct investment have positive impacts on economic growth with a high degree in developed countries. Our empirical results also indicate a positive and significant impact of research and development on financial development as well as economic growth in devel- oped countries. Financial crises, bank liquid reserves, and bank nonperforming loans affect negatively financial stability, financial development, as well as eco- nomic growth. This impact essentially amounts to the sensitivity and fragility of the banking system. In addition, inflation continues to affect economic growth in a negative way. The main findings confirm the complementarity and the importance of real, financial, monetary variables and bank solidity as well their significant impacts on financial stability and economic development. Keywords Financial stability . Monetary policy . Economic growth J Knowl Econ DOI 10.1007/s13132-017-0453-5 * Moheddine Younsi younsimoheddine@gmail.com Amine Nafla amine.nafa@yahoo.fr 1 Faculty of Economics and Management, Unit of Research in Development Economics, University of Sfax, Street of airport, km 4.5, LP 1088, 3018 Sfax, Tunisia 2 Higher Institute of Management, Unit of Research in Management Science, University of Sousse, Sousse, Tunisia