Financial Development and Economic Growth in Sub-Saharan Africa Revisited: Disentangling the Role of Banks and Stock Markets

The objective of this paper is to contribute to the analysis of the relationship between banks and stock markets in sub-Saharan African countries and their impacts on economic growth. While the literature on this issue is abundant, our article focuses on disentangling the effects of banks and stock markets on economic growth. Our approach is based on two indicators: the “activity–structure” variable, which measures the importance of stock markets in relation to banks, and the “activity–finance” variable, which takes into account the simultaneous development of banks and stock markets. Our empirical strategy is based on the estimation of a dynamic fixed effect model. The results indicate that the development of banks has a negative and significant impact, while the development of stock markets seems to have a positive influence on economic growth. It also shows that government authorities need to focus on developing stock markets at the expense of banks to promote economic growth.