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Linkages between Financial Deepening,Trade Openness and Economic Development: Causality Evidence from Sub-Saharan Africa

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  • Thomas Gries

    ()
    (University of Paderborn)

  • Manfred Kraft

    ()
    (University of Paderborn)

  • Daniel Meierrieks

    (University of Paderborn)

Abstract

This contribution tests for causality between financial deepening, trade openness and economic development for 16 Sub-Saharan African countries. An advanced econometric methodology is used to add to existing empirical evidence. Only limited support is found for finance promoting regional development. In particular, support for the popular hypothesis of finance-led growth is not substantial. In general, it is found that financial deepening and trade openness have swayed regional development only marginally. Thus, development strategies prioritizing financial sector or trade liberalization cannot be supported. Instead, a holistic policy approach taking into account other fundamental development factors is advocated.

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Bibliographic Info

Paper provided by University of Paderborn, CIE Center for International Economics in its series Working Papers CIE with number 15.

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Length: 33 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:pdn:ciepap:15

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Keywords: Financial Markets; Economic Growth; Openness; Hsiao’s Granger Causality; Sub- Saharan Africa;

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