Financial development and economic growth: evidence from West Africa
In this paper, we employ the Geweke (1982) decomposition method to examine the Granger causality between finance and growth in West Africa. Our sample contains twelve ECOWAS member countries (Economic Community of West African States) and we distinguish two subsamples: seven WAEMU countries which constitute an economic and monetary union (with the CFA Franc as their common currency) and five non-WAEMU countries. Data are from the World Bank (2008) and cover the period 1962-2006. The results show that:(1) finance leads economic growth in countries which have the common currency, (2) the reverse causation dominates in the other countries, (3) there is greater feedback between financial development and economic growth in countries sharing the common currency, (4) there is more instantaneous (contemporaneous) causality between finance and growth in WAEMU than in non-WAEMU countries suggesting that financial development affects growth and vice-versa in the short term in WAEMU countries. The first result can be explained by financial stability which suggests accelerating the process of creation of common currency for all West African countries. This paper highlights that the finance-growth nexus may vary across countries at similar stages of development and suggests that the existence of a stable monetary union may intensify the relationship between financial development and economic growth in developing countries.
Volume (Year): 30 (2010)
Issue (Month): 4 ()
|Contact details of provider:|| |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Abu-Bader, Suleiman & Abu-Qarn, Aamer S., 2008. "Financial development and economic growth: The Egyptian experience," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 887-898.
- De Gregorio, Jose & Guidotti, Pablo E., 1995.
"Financial development and economic growth,"
Elsevier, vol. 23(3), pages 433-448, March.
When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-10-00330. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.