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Savings and Financial Sector Development: Panel Cointegration Evidence from Africa

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Author Info
Roger Kelly (Institute for Development Policy and Management, University of Manchester)
George Mavrotas () (School of Economic Studies, University of Manchester)
Abstract

The present paper uses panel integration and cointegration tests for a dynamic heterogeneous panel of 17 African countries to examine the impact of financial sector development on private savings. We used three different measures of financial sector development to capture the variety of channels through which financial structure can affect the domestic economy. The empirical results obtained vary considerably among countries in the panel, thus highlighting the importance of using different measures of financial sector development rather than a single indicator. The evidence is rather inconclusive, although in most of the countries in the sample a positive relationship between financial sector development 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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Paper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number A4-2.

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Date of creation: Jun 2002
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Handle: RePEc:cpd:pd2002:a4-2

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Related research
Keywords: Financial Sector Development; Private Savings; Panel Cointegration Tests; Africa;

Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions

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