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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Revisiting the finance-growth nexus in Sub-Saharan Africa: results from error correction-based panel cointegration tests
Author:Walle, Yabibal M.
Year:2014
Periodical:African Development Review (ISSN 1467-8268)
Volume:26
Issue:2
Pages:310-321
Language:English
Geographic term:Subsaharan Africa
Subjects:finance
economic development
economic models
External link:https://doi.org/10.1111/1467-8268.12083
Abstract:This paper re-examines the long-run finance-growth nexus in sub-Saharan Africa (SSA) using data from 17 countries over the period 1975-2005. The author applies error correction-based panel cointegration tests that take into account cross-sectional dependence among countries. The results - unlike a previous study using the same data - indicate the existence of a long-run relationship between financial and economic development in SSA countries. Moreover, they clearly show that the long-run causality runs from financial to economic development, although a muted support for the reverse causal impact is observed when financial development is measured by the percentage of liquid liabilities in GDP. The estimated long-run parameters measuring the finance-growth link are positive and statistically significant. Therefore, the results strongly support policies aimed at developing the financial sector in SSA in order to promote long-run economic development. Bibliogr., notes, ref., sum. [Journal abstract]
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