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Savings and Financial Sector Development: Panel Cointegration Evidence from Africa

  • Roger Kelly

    (Institute for Development Policy and Management, University of Manchester)

  • George Mavrotas

    ()

    (School of Economic Studies, University of Manchester)

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    The present paper uses panel integration and cointegration tests for a dynamic heterogeneous panel of 17 African countries to examine the impact of financial sector development on private savings. We used three different measures of financial sector development to capture the variety of channels through which financial structure can affect the domestic economy. The empirical results obtained vary considerably among countries in the panel, thus highlighting the importance of using different measures of financial sector development rather than a single indicator. The evidence is rather inconclusive, although in most of the countries in the sample a positive relationship between financial sector development and private savings seems to hold. The empirical analysis also suggests that a change in government savings is offset by an opposite change in private savings in most of the countries in the panel, thus confirming the Ricardian equivalence hypothesis. Liquidity constraints do not seem to play a vital role in most of the African countries in the group, since the relevant coefficient is negative and significant in only a small group of countries.

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    Paper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number A4-2.

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    Date of creation: Jun 2002
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    Handle: RePEc:cpd:pd2002:a4-2
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    3. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
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    16. Oriana Bandiera & Gerard Caprio & Patrick Honohan & Fabio Schiantarelli, 2000. "Does Financial Reform Raise or Reduce Saving?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 239-263, May.
    17. Sarantis, Nicholas & Stewart, Chris, 2001. "Saving Behaviour in OECD Countries: Evidence from Panel Cointegration Tests," Manchester School, University of Manchester, vol. 69(0), pages 22-41, Supplemen.
    18. Banerjee, Anindya, 1999. " Panel Data Unit Roots and Cointegration: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 607-29, Special I.
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