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Financial development and economic growth in SADC countries: A panel study

Author

Listed:
  • Clement Moyo

    (Department of Economics, Nelson Mandela University)

  • Pierre Le Roux

    (Department of Economics, Nelson Mandela University)

Abstract

The impact of financial development on economic growth has received considerable attention since the 2008/2009 global financial crisis. High levels of credit to the private sector were partly to blame for the crisis and this has re-ignited the debate on whether the growth enhancing effects of financial development outweigh the retarding effects associated with financial crises. This paper therefore, examines the financial development-growth nexus in SADC countries during the period 1990-2015. Financial development indices are created due to the strong correlations between the individual financial development indicators using principal component analysis. The empirical analysis is conducted using the Pooled Mean Group estimator and the results show that financial development has a negative impact on economic growth. Due to financial vulnerabilities emanating from an inadequate monitoring and supervisory framework, further enhancement of financial development should be undertaken with caution in SADC countries.

Suggested Citation

  • Clement Moyo & Pierre Le Roux, 2018. "Financial development and economic growth in SADC countries: A panel study," Working Papers 1834, Department of Economics, Nelson Mandela University, revised Nov 2018.
    • Handle: RePEc:mnd:wpaper:1834
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    File URL: http://repec.mandela.ac.za/RePEc/mnd/wpaper/paper.1834.pdf
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    Cited by:

    1. Babar Hussain & Muhammad Naveed Tahir & Bahawal Khan, 2022. "Impact of Financial Development, Financial Liberalization and Economic Growth on Financial Instability: Evidence from Panel Data," Journal of Economic Impact, Science Impact Publishers, vol. 4(2), pages 142-151.
    2. Khamdan Rifa'i, 2023. "The Economic Impact of the US Unconventional Monetary Policy, Global Commodity Shocks, and Oil Price Shocks on ASEAN 3," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 616-624, September.

    More about this item

    Keywords

    Financial development; economic growth; PMG; ARDL and PCA.;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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