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Financial Development and Economic Growth: The Experience of 10 Sub-Saharan African Countries Revisited

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  • Anthony Enisan Akinlo

    (Academia de Studii Economice / Facultatea de Finante, Asigurari, Banci si Burse de Valori)

  • Tajudeen Egbetunde

    (Academia de Studii Economice / Facultatea de Finante, Asigurari, Banci si Burse de Valori)

Abstract

The paper examines the long run and causal relationship between financial development and economic growth for ten countries in sub-Saharan Africa. Using the vector error correction model (VECM), the study finds that financial development is cointegrated with economic growth in the selected ten countries in sub-Saharan Africa. That is there is a long run relationship between financial development and economic growth in the selected sub-Saharan African countries. The results show that financial development Granger causes economic growth in Central African Republic, Congo Republic, Gabon, and Nigeria while economic growth Granger causes financial development in Zambia. However, bidirectional relationship between financial development and economic growth was found in Kenya, Chad, South Africa, Sierra Leone and Swaziland. The results show the need to develop the financial sector through appropriate regulatory and macroeconomic policies. However, in Zambia emphasis needs to be placed on economic growth to propel financial development.

Suggested Citation

  • Anthony Enisan Akinlo & Tajudeen Egbetunde, 2010. "Financial Development and Economic Growth: The Experience of 10 Sub-Saharan African Countries Revisited," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 2(1), pages 017-028, June.
  • Handle: RePEc:rfb:journl:v:02:y:2010:i:1:p:017-028
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    References listed on IDEAS

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    1. Suleiman Abu‐Bader & Aamer S. Abu‐Qarn, 2008. "Financial Development and Economic Growth: Empirical Evidence from Six MENA Countries," Review of Development Economics, Wiley Blackwell, vol. 12(4), pages 803-817, November.
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    5. Abu-Bader, Suleiman & Abu-Qarn, Aamer, 2005. "Financial Development and Economic Growth: Time Series Evidence from Egypt," MPRA Paper 1113, University Library of Munich, Germany.
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