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The relationship between financial deepening and economic growth in Tanzania

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Listed author(s):
  • Oludele A. Akinboade

    (Department of Economics, University of South Africa (UNISA), Pretoria, Republic of South Africa)

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    Abstract

    The study examines the relationship between financial deepening and economic growth in Tanzania. The ratio of bank deposit liability to nominal gross national product is used as a measure of financial deepening and modelled for relationship with real per capita income. The static ordinary least squares (SOLS) and the dynamic ordinary least squares (DOLS) estimation methods are used. The model examines the periods of financial repression and of financial liberalization. The results suggest that though the real interest rate has insignificant impact overall, it is mixed for the two periods under consideration. Whereas, its impact on financial deepening is negative during the period of financial repression, it exerts a small but positive impact on financial development during the period of financial liberalization. The relationship between financial deepening and economic growth appears to be surprisingly negative and significant overall and during the period of financial liberalization but insignificant during financial repression. The results from the tests for causality suggest that financial deepening and economic growth are however independent in Tanzania. Copyright © 2000 John Wiley & Sons, Ltd.

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    Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

    Volume (Year): 12 (2000)
    Issue (Month): 7 ()
    Pages: 939-950

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    Handle: RePEc:wly:jintdv:v:12:y:2000:i:7:p:939-950
    DOI: 10.1002/1099-1328(200010)12:7<939::AID-JID668>3.0.CO;2-I
    Contact details of provider: Web page: http://www3.interscience.wiley.com/journal/5102/home

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    1. Valerie R. Bencivenga & Bruce D. Smith, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 195-209.
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    7. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
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    12. Giovannini, Alberto, 1983. "The interest elasticity of savings in developing countries: The existing evidence," World Development, Elsevier, vol. 11(7), pages 601-607, July.
    13. Adedoyin Soyibo, 1997. "Banking Sector Reforms in Africa: Effects on Savings, Investment and Financial Development," African Development Review, African Development Bank, vol. 9(1), pages 52-76.
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    17. Giovannini, Alberto, 1985. "Saving and the real interest rate in LDCs," Journal of Development Economics, Elsevier, vol. 18(2-3), pages 197-217, August.
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    Cited by:

    1. Xuezhi Qin & Benson Otieno Ndiege, 2013. "Role of Financial Development in Economic Growth: Evidence from Savings and Credits Cooperative Societies in Tanzania," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 4(2), pages 115-125, April.
    2. Baliamoune-Lutz, Mina N., 2006. "Financial Reform and the Mobilization of Domestic Savings: The Experience of Morocco," WIDER Working Paper Series 100, World Institute for Development Economic Research (UNU-WIDER).
    3. John Serieux, 2008. "Financial Liberalization and Domestic Resource Mobilization in Africa: an Assessment," Working Papers 45, International Policy Centre for Inclusive Growth.

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