1. Revisiting the Finance-Growth Nexus in Sub-Saharan Africa: Results from Error Correction-based Panel Cointegration Tests.
- Author
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Walle, Yabibal M.
- Subjects
- *
ERROR correction (Information theory) , *ECONOMIC development , *LIABILITIES (Accounting) , *LIQUIDITY (Economics) , *GROSS domestic product , *FINANCIAL services industry - 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. We apply error correction-based panel cointegration tests that take into account cross-sectional dependence among countries. Our 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, our results 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, our results strongly support policies aimed at developing the financial sector in SSA in order to promote long-run economic development. [ABSTRACT FROM AUTHOR]
- Published
- 2014
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