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Financial liberalisation and economic growth in Nigeria: an ARDL-bounds testing approach


  • Erasmus L. Owusu
  • Nicholas M. Odhiambo


Employing the Autoregressive Distributed Lag (ARDL)-Bounds testing approach, and using GDP - excluding the contributions from oil and gas, as well as the financial services sector - as the growth indicator between 1969 and 2008, the paper establishes a long-run relationship between economic growth and financial liberalisation, which is represented by an index. This index is calculated by using Principal Component Analysis (PCA). The paper finds that financial liberalisation policies have a positive and significant effect on economic growth in Nigeria - both in the short run and in the long run. The study, therefore, recommends that appropriate financial liberalisation policies should be pursued in Nigeria, in order to foster economic growth. However, considering the fact that financial markets are prone to market failures, the study cautions against adopting a laissez-faire approach to financial reforms.

Suggested Citation

  • Erasmus L. Owusu & Nicholas M. Odhiambo, 2014. "Financial liberalisation and economic growth in Nigeria: an ARDL-bounds testing approach," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 17(2), pages 164-177, June.
  • Handle: RePEc:taf:jpolrf:v:17:y:2014:i:2:p:164-177
    DOI: 10.1080/17487870.2013.787803

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    References listed on IDEAS

    1. Sylvanus I. Ikhide & Abayomi A. Alawode, 2001. "Financial Sector Reforms, Macroeconomic Instability and the Order of Economic Liberalization: The Evidence from Nigeria," Research Papers RP_112, African Economic Research Consortium.
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    Cited by:

    1. Oludele Emmanuel Folarin, 2019. "Financial reforms and industrialisation: evidence from Nigeria," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 21(1), pages 166-189, June.
    2. repec:gei:jnlfer:v:3:y:2018:i:1:p:71-84 is not listed on IDEAS
    3. Tuncay Celik & Levent Citak, 2016. "Banking Competition, Financial Liberalization and Economic Growth: Evidence from Turkish Economy during the 1990-2014 Period," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1750-1755.
    4. repec:taf:macfem:v:10:y:2017:i:2:p:151-171 is not listed on IDEAS
    5. Rudra P. Pradhan & Mak B. Arvin & Sara E. Bennett & Mahendhiran Nair & John H. Hall, 2016. "Bond Market Development, Economic Growth and Other Macroeconomic Determinants: Panel VAR Evidence," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 23(2), pages 175-201, June.
    6. Najia Saqib, 2016. "Banking sector liberalization and economic growth: case study of Pakistan," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 17(1), pages 125-139, February.
    7. repec:eee:quaeco:v:66:y:2017:i:c:p:136-148 is not listed on IDEAS
    8. Erasmus L Owusu, 2016. "Stock Market and Sustainable Economic Growth in Nigeria," Economies, MDPI, Open Access Journal, vol. 4(4), pages 1-13, November.
    9. repec:gam:jijfss:v:6:y:2018:i:3:p:69-:d:161634 is not listed on IDEAS
    10. repec:eee:jebusi:v:96:y:2018:i:c:p:15-41 is not listed on IDEAS

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