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Financial Development and Economic Growth: The Experience of 10 Sub-Saharan African Countries Revisited

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  • Anthony Enisan Akinlo

    (Academia de Studii Economice / Facultatea de Finante, Asigurari, Banci si Burse de Valori)

  • Tajudeen Egbetunde

    (Academia de Studii Economice / Facultatea de Finante, Asigurari, Banci si Burse de Valori)

Abstract

The paper examines the long run and causal relationship between financial development and economic growth for ten countries in sub-Saharan Africa. Using the vector error correction model (VECM), the study finds that financial development is cointegrated with economic growth in the selected ten countries in sub-Saharan Africa. That is there is a long run relationship between financial development and economic growth in the selected sub-Saharan African countries. The results show that financial development Granger causes economic growth in Central African Republic, Congo Republic, Gabon, and Nigeria while economic growth Granger causes financial development in Zambia. However, bidirectional relationship between financial development and economic growth was found in Kenya, Chad, South Africa, Sierra Leone and Swaziland. The results show the need to develop the financial sector through appropriate regulatory and macroeconomic policies. However, in Zambia emphasis needs to be placed on economic growth to propel financial development.

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Bibliographic Info

Article provided by Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante in its journal The Review of Finance and Banking.

Volume (Year): 02 (2010)
Issue (Month): 1 (June)
Pages: 017-028

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Handle: RePEc:rfb:journl:v:02:y:2010:i:1:p:017-028

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  1. Demirguc-Kunt, Asli & Levine, Ross, 2008. "Finance, financial sector policies, and long-run growth," Policy Research Working Paper Series 4469, The World Bank.
  2. Suleiman Abu-Bader & Aamer S. Abu-Qarn, 2008. "Financial Development and Economic Growth: Empirical Evidence from Six MENA Countries," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 12(4), pages 803-817, November.
  3. Suleiman Abu-Bader & Aamer Abu-Qarn, 2005. "Financial Development and Economic Growth: Time Series Evidence from Egypt," Working Papers, Ben-Gurion University of the Negev, Department of Economics 206, Ben-Gurion University of the Negev, Department of Economics.
  4. Philip Arestis & Panicos O. Demetriades & Kul B. Luintel, 1997. "Financial Development and Economic Growth: the Role of Stock Markets," Keele Department of Economics Discussion Papers (1995-2001), Department of Economics, Keele University 97/05, Department of Economics, Keele University.
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Cited by:
  1. Kamal, Mona, 2013. "Financial Development and Economic Growth in Egypt: A Re-investigation," MPRA Paper 48564, University Library of Munich, Germany.
  2. Samson E. Edo, 2012. "Performance of Liabilities Accruing from Liberalization of the Banking Sector in Nigeria," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 4(2), pages 135-146, December.
  3. Phiri, Andrew, 2014. "Asymmetric co-integration and causality effects between financial development and economic growth in South Africa," MPRA Paper 53055, University Library of Munich, Germany.

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