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Financial intermediation and economic growth: evidence from Western Africa

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  • Roger Atindehou
  • Jean Pierre Gueyie
  • Edoh Kossi Amenounve
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    Abstract

    The relationship between finance and economic growth has received considerable attention in economic development literature during recent decades. However, little interest has been devoted to African countries, and specifically, to West African countries. This paper tries to fill that gap, by using causality tests to empirically examine the relationship between finance and economic growth, in the context of West African country members of the Economic Community of West African States (ECOWAS). In all but a few countries, results indicate a weak causal relationship between finance and economic development on one side, and between economic development and finance on the other side. These results imply, ceteris paribus, that leaders of West African countries should focus their economic and monetary policies on the development of financial intermediation, which in turn will favour economic growth.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 15 (2005)
    Issue (Month): 11 ()
    Pages: 777-790

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    Handle: RePEc:taf:apfiec:v:15:y:2005:i:11:p:777-790

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    1. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
    2. Bencivenga, Valerie R & Smith, Bruce D, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 195-209, April.
    3. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Technical Working Papers 0100, National Bureau of Economic Research, Inc.
    4. Arestis, Philip & Demetriades, Panicos O, 1997. "Financial Development and Economic Growth: Assessing the Evidence," Economic Journal, Royal Economic Society, vol. 107(442), pages 783-99, May.
    5. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
    6. Levine, Ross & Loayza, Norman & Beck, Thorsten, 1999. "Financial intermediation and growth : Causality and causes," Policy Research Working Paper Series 2059, The World Bank.
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    Cited by:
    1. Wolde-Rufael, Yemane, 2009. "Re-examining the financial development and economic growth nexus in Kenya," Economic Modelling, Elsevier, vol. 26(6), pages 1140-1146, November.
    2. Gries, Thomas & Kraft, Manfred & Meierrieks, Daniel, 2009. "Linkages Between Financial Deepening, Trade Openness, and Economic Development: Causality Evidence from Sub-Saharan Africa," World Development, Elsevier, vol. 37(12), pages 1849-1860, December.
    3. Muhammad Tahir, 2008. "An Investigation of the Effectiveness of Financial Development in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 13(2), pages 27-44, Jul-Dec.
    4. Menyah, Kojo & Nazlioglu, Saban & Wolde-Rufael, Yemane, 2014. "Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach," Economic Modelling, Elsevier, vol. 37(C), pages 386-394.
    5. Thomas Gries & Manfred Kraft & Daniel Meierrieks, 2008. "Linkages between Financial Deepening,Trade Openness and Economic Development: Causality Evidence from Sub-Saharan Africa," Working Papers CIE 15, University of Paderborn, CIE Center for International Economics.
    6. Bassam AbuAl-Foul & Ismail Genc & Musa Darayseh, . "On the Causal Link between Financial Development and Economic Growth: Case of Jordan," Economics Working Papers 18-04/2014, School of Business Administration, American University of Sharjah.
    7. Halkos, George, 2010. "Financial and real sector interactions:the case of Greece," MPRA Paper 24391, University Library of Munich, Germany.
    8. Ferda Halicioglu, 2007. "The Financial Development and Economic Growth Nexus for Turkey," EERI Research Paper Series EERI_RP_2007_06, Economics and Econometrics Research Institute (EERI), Brussels.
    9. George E. Halkos & Marianna K. Trigoni, 2010. "Financial development and economic growth: evidence from the European Union," Managerial Finance, Emerald Group Publishing, vol. 36(11), pages 949-957, November.
    10. Uddin, Gazi Salah & Sjö, Bo & Shahbaz, Muhammad, 2013. "The Causal Nexus between Financial Development and Economic Growth in Kenya," MPRA Paper 49262, University Library of Munich, Germany, revised 23 Aug 2013.
    11. George E. HALKOS & Marianna K. TRIGONI, 2010. "231 Financial And Real Sector Interactions: The Case Of Greece," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(3(13)/Fal), pages 231-246.
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