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Finance-Growth Nexus in Africa: A Panel Generalized Method of Moments (GMM) Analysis

  • Michael Adusei

    ()

    (Kwame Nkrumah University of Science and Technology, Kumasi-Ghana)

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    The paper uses the dynamic GMM Model to examine the finance-growth nexus with panel data (1981-2010) from 24 African countries. Evidence suggests that there is a positive relationship between finance and economic growth and that there is a bi-directional causal relationship between finance and economic growth. To the extent that financial development and economic growth Granger-cause each other, we assert that policies directed at any of the two , if efficiently and vigorously pursued, could be beneficial to the study countries.

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    Article provided by Asian Economic and Social Society in its journal Asian Economic and Financial Review.

    Volume (Year): 3 (2013)
    Issue (Month): 10 (October)
    Pages: 1314-1324

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    Handle: RePEc:asi:aeafrj:2013:p:1314-1324
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    1. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
    2. Karima Saci & Gianluigi Giorgioni & Ken Holden, 2009. "Does financial development affect growth?," Applied Economics, Taylor & Francis Journals, vol. 41(13), pages 1701-1707.
    3. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
    4. Peter Quartey & Frank Prah, 2008. "Financial Development and Economic Growth in Ghana: Is There a Causal Link?," The African Finance Journal, Africagrowth Institute, vol. 10(1), pages 28-54.
    5. Manoel Bittencourt, 2010. "Financial Development and Economic Growth in Latin America: Is Schumpeter Right?," Working Papers 191, Economic Research Southern Africa.
    6. Pierre-Olivier Gourinchas & Rodrigo Valdes & Oscar Landerretche, 2001. "Lending Booms: Latin America and the World," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
    7. Panicos O. Demetriades & Philip Arestis, 1996. "Financial Development and Economic Growth: Assessing the Evidence," Keele Department of Economics Discussion Papers (1995-2001) 96/16, Department of Economics, Keele University.
    8. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    9. Enisan, Akinlo A. & Olufisayo, Akinlo O., 2009. "Stock market development and economic growth: Evidence from seven sub-Sahara African countries," Journal of Economics and Business, Elsevier, vol. 61(2), pages 162-171.
    10. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
    11. Ghali, Khalifa H, 1999. "Financial Development and Economic Growth: The Tunisian Experience," Review of Development Economics, Wiley Blackwell, vol. 3(3), pages 310-22, October.
    12. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
    13. repec:ner:tilbur:urn:nbn:nl:ui:12-3125518 is not listed on IDEAS
    14. Levine, Ross & Zervos, Sara, 1996. "Stock market development and long-run growth," Policy Research Working Paper Series 1582, The World Bank.
    15. Md abdul Wadud, 2009. "Financial development and economic growth: a cointegration and error-correction modeling approach for south Asian countries," Economics Bulletin, AccessEcon, vol. 29(3), pages 1670-1677.
    16. repec:ner:tilbur:urn:nbn:nl:ui:12-3125519 is not listed on IDEAS
    17. Umar Bida Ndako, 2010. "Financial Development and Economic Growth: Evidence from Nigeria," The IUP Journal of Financial Economics, IUP Publications, vol. 0(4), pages 37-58, December.
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