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Savings and financial sector development: panel cointegration evidence from Africa

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  • Roger Kelly
  • George Mavrotas
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    Abstract

    The paper uses different measures of financial sector development (FSD) for a dynamic heterogeneous panel of 17 African countries to examine the impact of FSD on private savings. An innovative econometric methodology is also employed related to a series of cointegration tests within a panel. This is an important contribution, since traditional panel data analysis adopted in previous studies suffers from serious heterogeneity bias problems. The empirical results obtained vary considerably among countries in the panel, thus highlighting the importance of using different measures of FSD rather than a single indicator. The evidence is rather inconclusive, although in most of the countries in the sample, a positive relationship between FSD and private savings seems to hold. The empirical analysis also suggests that a change in government savings is offset by an opposite change in private savings in most of the countries in the panel, thus confirming the Ricardian equivalence hypothesis. Liquidity constraints do not seem to play a vital role in most of the African countries in the group, since the relevant coefficient is negative and significant in only a small group of countries.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/13518470801890602
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal The European Journal of Finance.

    Volume (Year): 14 (2008)
    Issue (Month): 7 ()
    Pages: 563-581

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    Handle: RePEc:taf:eurjfi:v:14:y:2008:i:7:p:563-581

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    Related research

    Keywords: financial sector development; private savings; panel cointegration tests; Africa;

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    Cited by:
    1. James B. Ang, 2011. "Savings Mobilization, Financial Development And Liberalization: The Case Of Malaysia," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(3), pages 449-470, 09.
    2. Sahoo, Pravakar & Dash, Ranjan Kumar, 2013. "Financial sector development and domestic savings in South Asia," Economic Modelling, Elsevier, vol. 33(C), pages 388-397.

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