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Financial development and economic growth: the case of ECOWAS and WAEMU

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  • Komivi Afawubo

    ()
    (CEREFIGE - Université de Lorraine)

  • Vincent Fromentin

    ()
    (CEREFIGE - Université de Lorraine / CREA - Université du Luxembourg)

Abstract

This paper examines the interaction between financial development and economic growth of the Economic Community Of West African States (ECOWAS) and West African Economic and Monetary Union (WAEMU) using non-stationary panel data methodology and a panel cointegration approach. We estimate a trivariate vector error correction model (VECM) to simultaneously assess the long- and short-term impact of financial development on economic growth. The results suggest that the use of the common currency promotes financial stability and allow the same preference of demand domestic credit to private sector and liquid liabilities in foreign currencies both contribute to economic growth in the WAEMU. However in ECOWAS zone, in long-term (as in short-time), they prefer detente domestic credit (private and bank sector) which contribute to economic growth to liquid liabilities in foreign currencies which is negatively correlate to economic growth.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 33 (2013)
Issue (Month): 3 ()
Pages: 1715-1722

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Handle: RePEc:ebl:ecbull:eb-13-00125

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Keywords: financial development; economic growth; cointegration; causality; panel;

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  1. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  2. Berthelemy, Jean-Claude & Varoudakis, Aristomene, 1996. "Economic Growth, Convergence Clubs, and the Role of Financial Development," Oxford Economic Papers, Oxford University Press, vol. 48(2), pages 300-328, April.
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  8. Peter Pedroni, 2004. "Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis," Department of Economics Working Papers 2004-15, Department of Economics, Williams College.
  9. Jung, Woo S, 1986. "Financial Development and Economic Growth: International Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 34(2), pages 333-46, January.
  10. O. Damette & V. Fromentin, 2013. "Migration and labour markets in OECD countries: a panel cointegration approach," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2295-2304, June.
  11. Braun, Matias & Raddatz, Claudio, 2007. "Trade liberalization, capital account liberalization and the real effects of financial development," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 730-761, September.
  12. Emmanuel Lartey, 2010. "A note on the effect of financial development on economic growth," Applied Economics Letters, Taylor & Francis Journals, vol. 17(7), pages 685-687.
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