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Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach

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  • Menyah, Kojo
  • Nazlioglu, Saban
  • Wolde-Rufael, Yemane

Abstract

This paper examines the causal relationship between financial development and economic growth for 21 African countries within a framework which also accounts for international trade. We develop a financial development index based on four different financial development indicators and apply the panel bootstrapped approach to Granger causality. The empirical results show limited support for the finance-led growth and the trade-led growth hypotheses. The results imply that recent attempts at financial development and trade liberalization do not seem to have made a significant impact on growth.

Suggested Citation

  • Menyah, Kojo & Nazlioglu, Saban & Wolde-Rufael, Yemane, 2014. "Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach," Economic Modelling, Elsevier, vol. 37(C), pages 386-394.
  • Handle: RePEc:eee:ecmode:v:37:y:2014:i:c:p:386-394
    DOI: 10.1016/j.econmod.2013.11.044
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