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The Relationship Among Human Capital, Financial Development and Economic Growth: Panel VARX Evidence from ECOWAS Countries

Author

Listed:
  • Fuat Sekmen
  • Mahamane Lawali Atahirou Mahamane
  • Haşmet Gökırmak

Abstract

This paper analyses the relationship among economic growth, financial development, and human capital for 14 ECOWAS countries from 1970 to 2021 years using panel VARX (Vector Auto–Regressive with eXogenous variable). Results suggested evidence of bidirectional causality between money supply and life expectancy at birth and unidirectional causality running from GDP to domestic credit, education, human capital to GDP, money supply to GDP, health-based human capital to domestic credit, and domestic credit to broad money. Overall, financial development, as measured by broad money, hurt economic growth, while when measured by domestic credit, it had a positive but statistically insignificant effect on growth. Human capital, while represented by education did have a positive impact on GDP, while the impact of human capital when represented by health on GDP was also positive but statistically insignificant. Also, health-based human capital interacted positively with financial development, irrespective of the proxy used, but education-based human capital had no statistically significant interaction with any financial development measures. Economic growth has a significant positive impact on financial development through domestic credit, but has a positive and insignificant impact on money supply and human capital.

Suggested Citation

  • Fuat Sekmen & Mahamane Lawali Atahirou Mahamane & Haşmet Gökırmak, 2025. "The Relationship Among Human Capital, Financial Development and Economic Growth: Panel VARX Evidence from ECOWAS Countries," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 10(3), pages 897-925.
    • Handle: RePEc:ahs:journl:v:10:y:2025:i:3:p:897-925
    DOI: 10.30784/epfad.1695318
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    References listed on IDEAS

    as
    1. Muazu Ibrahim, 2018. "Interactive effects of human capital in finance–economic growth nexus in Sub-Saharan Africa," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 45(6), pages 1192-1210, November.
    2. Dada Matthew Abiodun & Posu Sunday Mauton A. & Okungbowa Osaretin Godspower & Abalaba Bamidele P., 2021. "The Nexus of Government Spending, Price, Output, and Money in the ECOWAS Sub-Region: Evidence from Panel ARDL and Causality Approach," Economics and Business, Sciendo, vol. 35(1), pages 71-90, January.
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    Keywords

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    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development

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