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Relationship between Financial Development and Economic Growth in Nigeria: A Triangulation Approach


  • Modebe Nwanneka Judith

    (Department of Banking and Finance, University of Nigeria, Enugu Campus, Nigeria)

  • Ezeaku Hillary Chijindu

    (Department of Banking and Finance, Caritas University, Enugu, Nigeria)


This paper aims at evaluating relation between financial development and economic growth in Nigeria, taking exception from existing literatures by integrating broad distinctive indicators of financial development into our model and using different econometric techniques to assess the finance- growth link between 1987 and 2014. The findings indicate that financial development and economic growth move along together in the long run. It was revealed that credit to the private sector, stock market capitalization and inflation have negative and impact on the economy, while broad money supply, trade openness and foreign direct investment exert positive influence on the economy. The error correction term in the model availed us the correctional influence in the speed of adjustment which indicated that errors of divergence from equilibrium was corrected at the speed of 86% each year. The Granger causality tests show that gross domestic product was granger causal for foreign direct investment, without a feedback system.

Suggested Citation

  • Modebe Nwanneka Judith & Ezeaku Hillary Chijindu, 2016. "Relationship between Financial Development and Economic Growth in Nigeria: A Triangulation Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1842-1850.
  • Handle: RePEc:eco:journ1:2016-04-74

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    References listed on IDEAS

    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
    2. repec:imf:imfsdn:15/8 is not listed on IDEAS
    3. Santiago Carbo Valverdie & David Humphrey & Francisco Rodriguez Fernandez, 2003. "Deregulation, Bank Competition and Regional Growth," Regional Studies, Taylor & Francis Journals, vol. 37(3), pages 227-237.
    4. Guglielmo Maria Caporale & Christophe Rault & Robert Sova & Anamaria Sova, 2009. "Financial Development and Economic Growth: Evidence from Ten New EU Members," Discussion Papers of DIW Berlin 940, DIW Berlin, German Institute for Economic Research.
    5. Ardic, Oya Pinar & Damar, H. Evren, 2006. "Financial Sector Deepening and Economic Growth: Evidence from Turkey," MPRA Paper 4077, University Library of Munich, Germany, revised Nov 2006.
    6. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    7. Christian Lambert Nguena & Roger Tsafack Nanfosso, 2013. "Financial Deepening Dynamics and Implication for Financial Policy Coordination in a Monetary Union: the case of WAEMU," AAYE Policy Research Working Paper Series 13_005, Association of African Young Economists, revised Nov 2013.
    8. Narcise Amin Rashti & Ebrahim Siami Araghi & Mahdi Shayeste, 2014. "Relationship Between Financial Development and Economic Growth, Evidence from Financial Crisis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(7), pages 930-940, July.
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    Cited by:

    1. Sayef Bakari, 2017. "The Three-Way Linkages Between Export, Import And Economic Growth: New Evidence From Tunisia," Journal of Smart Economic Growth, , vol. 2(3), pages 13-53, December.

    More about this item


    Financial Development; Economic Growth; Error Correction Model;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General


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