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

Author

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  • Mayoro Diop

    (Ecole Supérieure d’Economie Appliquée (ESEA), Université Cheikh Anta Diop, Dakar Fann BP. 5084, Senegal)

  • Mamadou Moustapha Ka

    (Ecole Supérieure d’Economie Appliquée (ESEA), Université Cheikh Anta Diop, Dakar Fann BP. 5084, Senegal)

  • Ababacar Sedikh Gueye

    (Ecole Supérieure d’Economie Appliquée (ESEA), Université Cheikh Anta Diop, Dakar Fann BP. 5084, Senegal)

  • Babacar Sène

    (Faculté des Sciences Economiques et de Gestion (FASEG), Université Cheikh Anta Diop, Dakar Fann BP. 5683, Senegal)

Abstract

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.

Suggested Citation

  • Mayoro Diop & Mamadou Moustapha Ka & Ababacar Sedikh Gueye & Babacar Sène, 2025. "Financial Development and Economic Growth in Sub-Saharan Africa Revisited: Disentangling the Role of Banks and Stock Markets," IJFS, MDPI, vol. 13(2), pages 1-22, May.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:2:p:92-:d:1668074
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    References listed on IDEAS

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    1. Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2000. "A New Database on the Structure and Development of the Financial Sector," The World Bank Economic Review, World Bank, vol. 14(3), pages 597-605, September.
    2. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    3. Bai, Jushan & Ng, Serena, 2001. "A consistent test for conditional symmetry in time series models," Journal of Econometrics, Elsevier, vol. 103(1-2), pages 225-258, July.
    4. Pierre Jacquet & Jean-Paul Pollin, 2012. "Systèmes financiers et croissance," Revue d'Économie Financière, Programme National Persée, vol. 106(2), pages 77-108.
    5. Babacar Sene & Ibrahima Thiam, 2018. "La relation en finance et croissance revisitée dans les pays de l'Afrique subsaharienne : Banques versus marchés financiers," L'Actualité Economique, Société Canadienne de Science Economique, vol. 94(1), pages 91-119.
    6. Thorsten Beck, 2003. "Stock markets, banks, and economic development:theory and evidence," EIB Papers 2/2003, European Investment Bank, Economics Department.
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