Purpose: The purpose of this thesis is to study the causal relationship between bank sector development and economic growth in four Nordic countries (Sweden, Finland, Denmark and Norway).

Method: Our thesis is based on a quantitative method. The study consists of a compilation and analysis of key financial indicators that represent economic growth and bank sector development. A Granger causality test has been conducted on the time series in order to measure the causal link between economic growth and bank sector development.

Theoretical framework: The study is based on the theory of endogenous growth and the causal relationship between bank sector development and economic growth also known as the demand following and supply leading hypothesis. 

Results: The results of the four countries are ambiguous. Except for Denmark, that follows the supply leading hypothesis, the remaining countries do not show a unanimous result.