Is financial development a spur to poverty reduction? Kenya's experience
AbstractPurpose – The paper seeks to examine the inter-temporal causal relationship between financial development and poverty reduction in Kenya during the period 1968-2006. The study attempts to answer one critical question: is financial development in Kenya a spur to poverty reduction? Design/methodology/approach – The study uses a trivariate causality model based on cointegration and error-correction mechanism. Unlike the majority of the previous studies, the current study incorporates the savings rate as an intermittent variable in the bivariate causality setting between financial development and poverty reduction – thereby creating a simple trivariate causality model. Findings – The study finds a distinct causal flow from financial development to poverty reduction in Kenya. In addition, the study finds a uni-directional causality from financial development to savings and a bi-directional causality between savings and poverty reduction. The results apply irrespective of whether the causality test is conducted in the short run or in the long run. Practical implications – The empirical results of this study will help policy makers to determine whether the financial development in Kenya is pro-poor and pro-savings. Originality/value – Although several attempts have been made to investigate the relationship between financial development, savings, economic growth and other macroeconomic variables, very few studies have examined the impact of financial development on the ultimate policy goal, i.e. poverty reduction. Moreover, the majority of the previous studies are based mainly on Asia and Latin America – affording sub-Saharan African countries very little or no coverage at all.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Journal of Economic Studies.
Volume (Year): 37 (2010)
Issue (Month): 3 (September)
Contact details of provider:
Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Banerjee, Abhijit V & Newman, Andrew F, 1993.
"Occupational Choice and the Process of Development,"
Journal of Political Economy,
University of Chicago Press, vol. 101(2), pages 274-98, April.
- Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Santonu Basu & Sushanta Mallick, 2008. "When does growth trickle down to the poor? The Indian case," Cambridge Journal of Economics, Oxford University Press, vol. 32(3), pages 461-477, May.
- Uddin, Gazi Salah & Shahbaz, Muhammad & AROURI, Mohamed El Hedi, 2013.
"Financial Development and Poverty Reduction Nexus:A Cointegration and Causality Analysis in Bangladesh,"
49264, University Library of Munich, Germany, revised 23 Aug 2013.
- Uddin, Gazi Salah & Shahbaz, Muhammad & Arouri, Mohamed & Teulon, Frédéric, 2014. "Financial development and poverty reduction nexus: A cointegration and causality analysis in Bangladesh," Economic Modelling, Elsevier, vol. 36(C), pages 405-412.
- Abdelhafidh Dhrifi, 2013. "Financial Development and Poverty: What Role for Growth and Inequality?," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(4), pages 119-129, October.
- Shahbaz, Muhammad & Ur Rehman, Ijaz, 2013. "Multivariate–Based Granger Causality between Financial Deepening and Poverty: The Case of Pakistan," MPRA Paper 50834, University Library of Munich, Germany, revised 20 Oct 2013.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jade Turvey).
If references are entirely missing, you can add them using this form.