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Multidimensional analysis of finance-growth nexus in Africa: evidence from a panel ARDL model

Author

Listed:
  • Abebe Gule Girma

    (Woldia University
    Khazar University)

  • Fariz Huseynov

    (North Dakota State University)

Abstract

We investigate the relationship between financial development and economic growth across 30 African countries from 2000–2020 using a panel ARDL model. We focus on four dimensions of financial development – financial deepening, efficiency, liquidity, and stability. While financial efficiency and deepening measures lead to positive economic growth, liquidity and stability measures of financial development significantly hinder growth. The effect of the financial sector development on economic growth is income dependent such that the effect is more evident in upper middle-income countries. Our findings suggest that a one-size-fits-all approach is insufficient, and policymakers should analyze different dimensions of financial development and incorporate regional and income contexts.

Suggested Citation

  • Abebe Gule Girma & Fariz Huseynov, 2025. "Multidimensional analysis of finance-growth nexus in Africa: evidence from a panel ARDL model," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 49(2), pages 429-449, June.
    • Handle: RePEc:spr:jecfin:v:49:y:2025:i:2:d:10.1007_s12197-025-09712-2
    DOI: 10.1007/s12197-025-09712-2
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    Keywords

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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • P43 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Finance; Public Finance
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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