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Financial development and economic growth: the case of ECOWAS and WAEMU

Author

Listed:
  • Komivi Afawubo

    (CEREFIGE - Université de Lorraine)

  • Vincent Fromentin

    (CEREFIGE - Université de Lorraine / CREA - Université du Luxembourg)

Abstract

This paper examines the interaction between financial development and economic growth of the Economic Community Of West African States (ECOWAS) and West African Economic and Monetary Union (WAEMU) using non-stationary panel data methodology and a panel cointegration approach. We estimate a trivariate vector error correction model (VECM) to simultaneously assess the long- and short-term impact of financial development on economic growth. The results suggest that the use of the common currency promotes financial stability and allow the same preference of demand domestic credit to private sector and liquid liabilities in foreign currencies both contribute to economic growth in the WAEMU. However in ECOWAS zone, in long-term (as in short-time), they prefer detente domestic credit (private and bank sector) which contribute to economic growth to liquid liabilities in foreign currencies which is negatively correlate to economic growth.

Suggested Citation

  • Komivi Afawubo & Vincent Fromentin, 2013. "Financial development and economic growth: the case of ECOWAS and WAEMU," Economics Bulletin, AccessEcon, vol. 33(3), pages 1715-1722.
    • Handle: RePEc:ebl:ecbull:eb-13-00125
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    References listed on IDEAS

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    Cited by:

    1. Peterson K. Ozili & Jide Oladipo & Paul Terhemba Iorember, 2022. "Effect of abnormal credit expansion and contraction on GDP per capita in ECOWAS countries," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 51(3), November.

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    More about this item

    Keywords

    financial development; economic growth; cointegration; causality; panel;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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