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Impact Of Financial Development On Economic Growth In The Wamz: A Heterogeneous Panel Data Approach

Author

Listed:
  • Ibrahima Diallo

    (West African Monetary Institute)

  • Isatou Mendy

    (West African Monetary Institute)

Abstract

This paper investigates the impact of financial development on economic growth in the West African Monetary Zone (WAMZ) from 1990 through 2015 using a Heterogeneous Panel Data Approach. The study made use of Two (2) financial indicators: liquid liabilities of the financial system as a percent of GDP and domestic credit to private sector as a percent of GDP. Economic growth is proxied by the real GDP per capita. Our results show that while liquid liabilities exerts long-run positive impact on economic growth in the WAMZ, the positive impact of domestic credit to private sector on economic growth is not in the long run. At country level, our findings indicate that most countries in the WAMZ could foster long run economic growth through changes in the size of financial institutions. Our findings suggest that structural reforms are needed in order to channel private credit to long run productive and growth-driving sectors.

Suggested Citation

  • Ibrahima Diallo & Isatou Mendy, 2017. "Impact Of Financial Development On Economic Growth In The Wamz: A Heterogeneous Panel Data Approach," West African Journal of Monetary and Economic Integration, West African Monetary Institute, vol. 17(1), pages 1-18, June.
    • Handle: RePEc:wam:journl:v:17:y:2017:i:1:p:1-18
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    More about this item

    Keywords

    Economic growth; Finance; Panel Data; WAMZ;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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