IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-10-00330.html
   My bibliography  Save this article

Financial development and economic growth: evidence from West Africa

Author

Listed:
  • Zaka Ratsimalahelo

    () (University of Franche-Comté- CRESE)

  • Mamadou Diang Barry

    () (University of Franche-Comté- CRESE)

Abstract

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.

Suggested Citation

  • Zaka Ratsimalahelo & Mamadou Diang Barry, 2010. "Financial development and economic growth: evidence from West Africa," Economics Bulletin, AccessEcon, vol. 30(4), pages 2996-3009.
  • Handle: RePEc:ebl:ecbull:eb-10-00330
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I4-P275.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. De Gregorio, Jose & Guidotti, Pablo E., 1995. "Financial development and economic growth," World Development, Elsevier, vol. 23(3), pages 433-448, March.
    2. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. King, Alan & Ramlogan-Dobson, Carlyn, 2015. "Is Africa Actually Developing?," World Development, Elsevier, vol. 66(C), pages 598-613.

    More about this item

    Keywords

    Finance; growth; Granger causality; monetary union; ECOWAS; Geweke decomposition test. 1;

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.