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Relationship between Financial Development and Economic Growth in Nigeria: A Triangulation Approach

Author

Listed:
  • Modebe Nwanneka Judith

    (Department of Banking and Finance, University of Nigeria, Enugu Campus, Nigeria)

  • Ezeaku Hillary Chijindu

    (Department of Banking and Finance, Caritas University, Enugu, Nigeria)

Abstract

This paper aims at evaluating relation between financial development and economic growth in Nigeria, taking exception from existing literatures by integrating broad distinctive indicators of financial development into our model and using different econometric techniques to assess the finance- growth link between 1987 and 2014. The findings indicate that financial development and economic growth move along together in the long run. It was revealed that credit to the private sector, stock market capitalization and inflation have negative and impact on the economy, while broad money supply, trade openness and foreign direct investment exert positive influence on the economy. The error correction term in the model availed us the correctional influence in the speed of adjustment which indicated that errors of divergence from equilibrium was corrected at the speed of 86% each year. The Granger causality tests show that gross domestic product was granger causal for foreign direct investment, without a feedback system.

Suggested Citation

  • Modebe Nwanneka Judith & Ezeaku Hillary Chijindu, 2016. "Relationship between Financial Development and Economic Growth in Nigeria: A Triangulation Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1842-1850.
    • Handle: RePEc:eco:journ1:2016-04-74
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    References listed on IDEAS

    as
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    Cited by:

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    2. Bakari, Sayef, 2017. "Why is South Africa Still a Developing Country?," MPRA Paper 80763, University Library of Munich, Germany.

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    More about this item

    Keywords

    Financial Development; Economic Growth; Error Correction Model;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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