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Empirical Research on Financial Efficiency and Economic Growth in Sub-Saharan Africa

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  • Nigo, Ayine R.S.
  • Gibogwe, Vincent

Abstract

This study contributes to the literature on financial efficiency and growth. Given the increase in domestic credit, we show evidence of the effects of controlling institutional variables. The domestic credit is adverse, with an insignificant impact on per capita income growth. We make two observations from our findings. First, the negative but insignificant coefficients of the measure of bank credit across all model specifications seem to go against the supply-leading hypothesis, as financial development hurts economic growth; nevertheless, given that the impact is insignificant, this draws more into a neutrality hypothesis of no effect. Second, the findings are likely indications of the underdeveloped state of sub-Saharan Africa's financial system, implying that the present state of the financial systems is not robust enough to be a contributory drive towards enhancing economic growth in the region. However, all models have positive control variables (Inflation and gross fixed capital formation). All coefficients of interactions between credit and institutional quality are statistically insignificant (negative in four of six models).

Suggested Citation

  • Nigo, Ayine R.S. & Gibogwe, Vincent, 2023. "Empirical Research on Financial Efficiency and Economic Growth in Sub-Saharan Africa," MPRA Paper 116041, University Library of Munich, Germany, revised 14 Dec 2022.
    • Handle: RePEc:pra:mprapa:116041
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    More about this item

    Keywords

    foreign direct investment; economic growth; absorptive capacity; human capital; market liberalization.;
    All these keywords.

    JEL classification:

    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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