IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Financial deepening, economic growth and development: Evidence from selected sub-Saharan African countries

Listed author(s):
  • John E. Udo Ndebbio
Registered author(s):

    Lack of or stagnant growth of output of any country is often caused by "shallow - finance". A shallow financial depth (FD) means that the range of financial assets for that country is narrow. It is a scenario that goes far in explaining why most SSA countries have low or negative per capita growth rates. This study identifies the range of financial assets that can adequately approximate financial deepening, which simply means an increase in the supply of financial assets in the economy. FD is represented by two variables, the degree of financial intermediation/development (M2/Y) and the growth rate in per capita real money balances (GPRMB). Because of lack of data on other measures of financial assets in most SSA countries, broad money (M2) was used as numerator for both variables. Estimations depending on the two measures of FD and other explanatory variables of interest were done with an ordinary least squares (OLS) multiple regression procedure. Three modelled equations, with justifications for each, were estimated and analysed. A cross-country regression was used for 34 SSA countries. To even out year-to-year fluctuations as well as reflect underlying structural changes, the variables were calculated on a decade average basis. Two policy implications derive from the study: that SSA countries should strive hard to make real money balances grow, and that these countries should also come up with policies to improve financial development/intermediation. Given such factors as price stabilization, elimination of fiscal deficit and removal of various restrictions on financial institutions, real money balances could be made to grow. Financial intermediation/ development could positively affect output growth if, among other suggested ways, the volume of investment is raised.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by African Economic Research Consortium in its series Research Papers with number RP_142.

    in new window

    Length: 52 pages
    Date of creation: Aug 2004
    Handle: RePEc:aer:rpaper:rp_142
    Contact details of provider: Postal:
    P.O. Box 62882, Nairobi

    Phone: (254-2) 228057
    Fax: (254-2) 219308
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:aer:rpaper:rp_142. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Steven Kinuthia)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.