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Influence Of Macroeconomic Stability On Financial Development In Developing Economies: Evidence From West African Region

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  • KIZITO UYI EHIGIAMUSOE

    (School of Accounting and Finance, Taylor’s University, 47500, Selangor, Malaysia)

  • HOOI HOOI LEAN

    (Economics Program, School of Social Sciences, Universiti Sains Malaysia 11800 Penang, Malaysia)

  • JIN HOOI CHAN

    (Business School, University of Greenwich, Old Royal Naval College, London SE10 9LS, United Kingdom)

Abstract

This paper examines the effects of macroeconomic stability on financial development in the West African region. Macroeconomic stability is measured based on five Maastricht Criteria’s variables namely inflation rate, real exchange rate, government debt, fiscal deficit and real interest rate. The study employs dynamic models on the panel data. We find that macroeconomic stability has significant effects on financial development in the region. Specifically, inflation rate, real exchange rate and fiscal deficit have negative effects, while the effects of government debt and real interest rate are positive. The implication of this study is that macroeconomic stability variables are determinants of financial development. Hence, developing economies should strive to achieve macroeconomic stability in order to drive financial development, with a view to achieving sustainable economic development.

Suggested Citation

  • Kizito Uyi Ehigiamusoe & Hooi Hooi Lean & Jin Hooi Chan, 2020. "Influence Of Macroeconomic Stability On Financial Development In Developing Economies: Evidence From West African Region," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(04), pages 837-856, June.
    • Handle: RePEc:wsi:serxxx:v:65:y:2020:i:04:n:s0217590819500553
    DOI: 10.1142/S0217590819500553
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    Citations

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    Cited by:

    1. Jiang, Chun & Zhang, Yadi & Kamran, Hafiz Waqas & Afshan, Sahar, 2021. "Understanding the dynamics of the resource curse and financial development in China? A novel evidence based on QARDL model," Resources Policy, Elsevier, vol. 72(C).
    2. Hamdi Becha & Maha Kalai & Kamel Helali, 2023. "Smooth transition regression model relating inflation to economic growth in Tunisia," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 12(1), pages 1-26, December.
    3. Nazima Ellahi & Adiqa Kausar Kiani & Muhammad Awais & Hina Affandi & Rabia Saghir & Sarah Qaim, 2021. "Investigating the Institutional Determinants of Financial Development: Empirical Evidence From SAARC Countries," SAGE Open, , vol. 11(2), pages 21582440211, April.
    4. Aleksandra Ostrowska & Paulina Pukin-Sowul, 2023. "Macroeconomic Stability of Central and Eastern European Countries in the Context of Monetary Integration," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 390-408.
    5. Jiménez Sotelo, Renzo, 2023. "The influence of domestic public debt market in the financial development: evidence of 52 countries in 1990-2020," MPRA Paper 121021, University Library of Munich, Germany.
    6. Kizito Uyi Ehigiamusoe & Mohamad Shaharudin Samsurijan, 2021. "What matters for finance‐growth nexus? A critical survey of macroeconomic stability, institutions, financial and economic development," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5302-5320, October.
    7. Jiménez-Sotelo, Renzo A., 2023. "La influencia del mercado de deuda pública interna en el desarrollo financiero: evidencia de 52 países en 1990-2020," El Trimestre Económico, Fondo de Cultura Económica, vol. 90(359), pages 773-804, julio-sep.
    8. Kizito Uyi Ehigiamusoe & Vinitha Guptan & Suresh Narayanan, 2021. "Rethinking the impact of GDP on financial development: Evidence from heterogeneous panels," African Development Review, African Development Bank, vol. 33(1), pages 1-13, March.
    9. Abdul Rahman & Muhammad Arshad Khan, 2024. "Role of consistent regime-specific policies in recovering the negative relationship between financial development and economic growth," Economic Change and Restructuring, Springer, vol. 57(4), pages 1-27, August.
    10. Sintos, Andreas, 2023. "Does inflation worsen income inequality? A meta-analysis," Economic Systems, Elsevier, vol. 47(4).

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