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In this empirical paper, we revisit the financial development-impact of financial globalization using a panel dataset comprising the OECD countries for the period 1996–2017. We rely on a multidimensional financial development index and the KOF financial globalization index. We find that financial globalization has a positive impact on financial development. Considering the heterogeneity in the conditional distributions of financial development, we also discover that financial globalization favourably impacts financial development across all the conditional distributions (quantiles) albeit with varying magnitude. These findings are robust to the KOF de facto and de jure measures of financial globalization as well as an alternative measure of financial globalization–financial openness index.

With growing industrialization comes environmental concerns. Thus, we are motivated to offer empirical insights into how industrialization affects the environment. Using ecological footprint to proxy environmental degradation, we examine the heterogeneous effects of industrialization on the environment. We utilize data from 37 African countries from 2000 to 2016 and use the quantile regression model for panel data. The results show a noteworthy heterogeneous environmental effect of industrialization. Industrialization is found to increase environmental degradation in the 10–30th quantiles, while in the 40–90th quantiles, industrialization reduces environmental degradation. To curb environmental degradation, manufacturing firms should adopt and utilize more greener technologies in their production processes. Besides, environmental regulations must be enforced to ensure that manufacturing activities contribute to sustainable environment and development.

This paper examines the effect of foreign direct investment (FDI) on CO2 emissions by using disaggregated emissions data; territorial-based and consumption-based emissions. FDI is measured in three ways; inflow, net inflow, and stock. Employing data over the period 1995–2014 and a number of estimators, the results indicate FDI (whether measured as inflow or net inflow) has negative impact on emissions (irrespective of the measurement). However, the impact is generally found to be greater for the territorial-based emissions. The results of the FDI flow variables largely support the pollution halo hypothesis. Thus, the results are supportive of the robust effect of FDI’s positive effect. Regarding the stock measure, the negative effect of FDI is only found for the territorial-based CO2 emissions. Since the territorial-based emissions capture emissions in the domestic economy only, it is not surprising that the plausible efficiency of FDI stock is found to reduce these emissions rather the consumption-based. FDI stock is now considered part of the local economy. The results of the paper are largely not parallel with previous studies that did not disaggregate CO2 emissions. This we believe is an indication that the measure of CO2 matters for the analyses of the FDI-emissions nexus.

We determine the nexus between imports and economic growth for a sample of 26 African countries for the period 1990-2015 within the neoclassical production function framework. We mainly contribute to literature by overcoming the weak theoretical modelling framework and possible model specification bias in most extant studies. Using the Toda-Yamamoto Granger non-causality test, the empirical results indicate that there is absence of causality between imports and economic growth in more than half of the countries in the sample, thus suggesting that neutrality hypothesis is predominant among the countries. We provide ample evidence that causality is absent from imports to economic growth. However, our results should be treated with caution because the absence of causality from imports to economic growth should not imply that imports do not play a role in the growth process of an economy.

We pioneer empirical investigation into the causal relationship between foreign direct investment (FDI) and globalization in Africa with the aid of the Dumitresu-Hurlin panel Granger causality test...

In this paper, we test for causality between imports and economic growth in 41 African countries. We differ from earlier studies by testing for causality at high and low frequency levels, that is, ...

The interaction of foreign aid and foreign direct investment is an important issue for developing countries in Africa. I probe into the mediating role of institutional quality and financial development using a panel data set of 47 countries over the period 1996–2016. I find that the effectiveness of foreign aid in attracting foreign direct investment is greater in countries with better institutional quality and sound financial development. The implications for policy are outlined.

Purpose In this study, the authors examine how economic freedom mediates the impact of foreign direct investment (FDI) on economic growth in Africa. Design/methodology/approach By using data from 41 countries over the period 2000–2017, the authors invoke Seo and Shin's (2016) sample splitting approach while relying on the recently developed Seo et al.'s (2019) computationally robust bootstrap algorithm to achieve the purpose of this study. Findings The authors find evidence of economic freedom threshold that bifurcates the link between FDI and economic growth in Africa. More precisely, FDI does not improve overall economic growth for African countries whose economic freedom index is below the estimated threshold while significantly spurring growth for African countries with economic freedom above this threshold. Practical implications African countries need to strive towards improving their level of economic freedom through the strengthening of rule of law, reducing government size, promoting regulatory efficiency and further opening of the goods and capital markets. Originality/value The association between FDI and economic growth has been well documented. While the positive theoretical postulations are almost conclusive, empirical literature on the precise effect of FDI remains contentious and far from being settled. What is missing in the existing literature in Africa is whether countries' level of economic freedom mediates how FDI explains the variations in economic growth across African countries. The authors fill this research gap.

Earlier studies on institutions and financial sector development are less informative given their failure to examine how the different forms of institutions influence countries’ level of domestic f...

We examine the impact of macroeconomic factors on stock market development in sub-Saharan Africa. More specifically, we examine the sensitivity of the impact of macroeconomic factors on stock marke...

In this paper, we use a panel dataset of 33 countries to revisit the finance–economic growth nexus in sub-Saharan Africa for the period 1990–2015. Unlike previous studies, we proxy finance with a composite index of financial development which accounts for the multidimensionality of financial development. Also, we consider real sector growth in our empirical analyses. We establish long-run relationships between finance and (real sector and economic) growth. We provide evidence to show that finance and (real sector and economic) growth cause each other. Overall, the findings suggest that the finance (real sector and economic)–growth nexus is sensitive to the choice of econometric methodology.

This study examines the impact of financial risks in form of credit, interest rate and liquidity risk on the profitability of systematically important banks in Nigeria over the period from 2010 to 2016. The fixed effects regression model is estimated with Driscoll–Kraay standard errors in order to produce results that are robust to heteroscedaticity, autocorrelation, cross-sectional dependence and temporal dependence. After controlling for some bank-specific, industry-specific, macroeconomic and institutional factors, the empirical results show that credit and liquidity risks have a positive impact on bank profitability while interest rate does not have an impact. The results are robust to alternative measures of profitability.

Since the seminal paper by Rajan and Zingales in 2003, a plethora of studies have been motivated to establish whether the simultaneous opening of trade and capital borders leads to financial sector development. We test whether the simultaneous openness hypothesis is valid for Nigeria, with a focus on the banking sector and stock market. Using annual data from 1990 to 2015 and an instrumental variable regression estimation technique, we show that the simultaneous increase of trade and financial openness limits banking sector and stock market development. Thus, there is no empirical evidence to validate the simultaneous openness hypothesis in Nigeria. It also shows that trade openness is more beneficial for banking sector and stock market development in Nigeria than financial openness.

Foreign direct investment (FDI) provides many African countries an important source of capital inflow. Despite notable improvements in these capital-scarce countries' economic, political, and social conditions, foreign investors have not considered them viable host locations. Since FDI brings enormous spillovers to its host, some countries have recently institutionalized globalization as the catalyst for reversing the trend. Against this backdrop, we examine the FDI–globalization nexus across 47 African countries for the 1996–2016 period. Using the augmented mean group estimator, the results suggest that FDI in Africa is indeed globalization-induced. Moreover, we find this positive nexus to be driven by the economic dimension of globalization. Overall, we demonstrate the potential of globalization in stimulating an FDI boom in Africa.

Bhagwati hypothesis opines that the overall impact of foreign direct investment (FDI) on economic growth is conditioned on countries’ level of integration with the international market. We test this hypothesis for some selected countries in sub-Saharan Africa (SSA). Does this hypothesis hold given our sample evidence? Yes! No! Maybe! We explain why. By invoking the sample splitting and threshold estimation technique, we find that the two measures of openness (trade openness and exports) mediate the FDI-economic growth relationship in three countries and this is an indication of complete Bhagwati hypothesis in these countries. Also, we find that, given the measure of openness, four countries exhibit incomplete Bhagwati hypothesis. Finally, we find no support for the Bhagwati hypothesis for most countries. Based on these findings, we argue that the validity of the Bhagwati hypothesis may be contingent on both country characteristics and the indicator of openness.

Despite the burgeoning literature on the globalization-environmental degradation nexus, this area of empirical interest is still riddled with ambiguity. Thus, based on an extended Stochastic Impacts by Regression on Population, Affluence and Technology (STIRPAT) model, we re-investigate the effect of globalization on environmental degradation for 27 selected industrialized countries over the period 1991–2016. More specifically, we shed light into how overall globalization and its various components – economic, social and political globalization – affect environmental degradation. We advance existing literature by considering a measurement approach which disaggregates overall, economic, social and political globalization into their de facto and de jure aspects. Using the augmented mean group estimator, we find that overall and economic globalization reduce environmental degradation while social and political globalization do not exert any significant effect on globalization. With respect to the de facto and de jure aspects, we observe that, while only de facto economic globalization mitigates environmental degradation, de jure overall, economic and social globalization also dampen environmental degradation. We provide some policy implications in the end.

This article examines whether openness and democracy deepen the banking sector in sub-Saharan Africa, using a sample of 33 countries over the period 1991–2015. After controlling for the potential effects of some country characteristics, this article shows that simultaneous opening of trade and capital borders and higher levels of democratic governance deepen the banking sector. It also shows that increasing financial openness without increasing trade openness would result in a shallower banking sector but increasing trade openness alone is adequate to deepen the banking sector. This article provides evidence to support the simultaneous openness hypothesis and political economy theory of financial development.

The law and finance theory posits that legal institutions are associated with stock market development. We examine the effectiveness of legal institutions in stock market development in 11 countries in sub-Saharan Africa for the period 2000–2014. Based on the two-stage least squares estimator, we find that the effectiveness of legal institutions does not promote stock market development in sub-Saharan Africa, after controlling for income, banking sector development, inflation, endowments, capital account liberalization, culture, and democracy. We provide empirical support for the law and finance theory by establishing that legal institutions explain cross-country differences in stock market development in sub-Saharan Africa.

This study examines the determinants of banking sector development in sub-Saharan African countries using a panel of 25 countries from 1997 to 2014. It utilises the system Generalized Method of Moments (GMM) dynamic panel model estimator. Using a composite index of banking sector development, the estimation results show that population density and simultaneous openness to trade and capital promote banking sector development while financial liberalisation hinders banking sector development. This study reveals that institutional quality, population density, and trade openness increases the depth of the banking sector. Also, it demonstrates that law, inflation, and religion promotes the efficiency of the banking sector while latitude, trade openness, income level, and ethnic diversity reduce banking sector efficiency. In addition, it shows that law and simultaneous openness to trade and capital enhances the stability of the banking sector while land area, financial liberalisation, economic growth, and inflation adversely affect banking sector stability.

Unemployment is a persistent challenge for countries, especially the developing ones. Nigeria as a developing country faces a herculean task reducing the increasing spate of joblessness amongst her citizens. Okun’s law explains the relationship between unemployment and economic growth in an economy. This study therefore investigates Okun’s law in Nigeria between 1985 and 2015 through the dynamic model. The generalized method of moments estimation result reveals that that present and past output growth are negatively related to unemployment rate. However, only past output growth has a significant effect on unemployment rate. It also shows that past unemployment rate is significantly and positively associated with present unemployment rate. The Toda-Yamamoto Granger non-causality test finds that there is no causality between unemployment and economic growth. This study presents evidence to partially support Okun’s law of inverse relationship between unemployment and output growth and suggests that promoting economic growth can be a policy tool for reducing unemployment rate in Nigeria.

The controversy existing on the efficacy of monetary and fiscal policy to influence the economy is unending. This study evaluates the relative impact of monetary and fiscal policy in Nigeria from 1986 to 2014 using a modified St. Louis equation. Employing the Ordinary Least Squares estimation method, this study reveals that growth in money supply and export have a positive and significant effect on growth in output of the economy while growth in government expenditure has a negative and insignificant effect. This study provides evidence that monetary policy has a greater growth-stimulating effect on the economy than fiscal policy. It recommends that monetary policy rather than fiscal policy should be relied upon by the Nigerian government as an economic stabilisation tool.

It is theoretically believed that increase in firm size would result to increase in firm profitability. Therefore, this study examines the relationship between size and profitability of six banks in Nigeria after the 2005 consolidation exercise. The measure of profitability is return on assets. Employing the static panel data regression method, the study found that size has an insignificant negative relationship with bank profitability. This study concludes that the 2005 consolidation exercise did not enhance the profitability of the selected banks.

This study assesses from a macroeconomic perspective the determinants of small and medium scale enterprises (SMEs) financing by the banking sector in Nigeria between 1992 and 2014. The empirical model specifies commercial banks’ lending to SMEs as a function of selected macroeconomic indicators which include commercial banks’ total deposits, financial deepening, interest rate spread, lending rate, monetary policy rate, commercial banks’ total assets and inflation rate. The 2SLS estimation results show that only commercial banks’ deposit mobilization, depth of the financial sector and size of the banking sector act as determinants of SMEs financing by commercial banks

In this paper, we extend the debate on environmental quality in sub-Saharan Africa (SSA) by examining the nexus between financial development and environmental quality. While doing this, we also investigate the technology effect of financial development on environmental quality and the direction of causality between financial development and environmental quality. Unlike prior studies, we use a novel composite index of financial development. We rely on a panel dataset of 35 SSA countries for the period 1985-2014. Through the augmented mean group estimator, we offer the following findings. First, financial development is a positive (negative) driver of environmental quality (CO2 emissions). Second, financial development has an unfavourable technology effect on environmental quality. Lastly, lower environmental quality is associated with increase in population, affluence and technology. We also find, via the Dumitrescu-Hurlin panel causality test, that there is a bidirectional causal relationship between financial development and CO2 emissions. We document the policy implications in the concluding section.

The relationship between government expenditure and economic growth has been an issue of debate over the years. This study investigates the causality between government expenditure and economic growth in Nigeria between 1985 and 2014. Following the Toda-Yamamoto non-Granger causality testing approach, it finds that government expenditure and economic growth have no causal effect on each other. This offers evidence to invalidate Wagner’s law and the Keynesian proposition in Nigeria. This study recommends that government should strengthen its efforts to curtail corruption as well as introduce stricter checks and controls to reduce or eliminate the profligacy of public funds.

This study focuses on the Nigerian industrial sector to examine the relevance of financial sector development on real sector productivity in the 21 st century. The model adapts the financial sector development measures used in King and Levine (1993) as predictors of industrial sector production output. Estimating the model with Ordinary Least Square (OLS) method, the study reveals that there is a strong linear relationship between the financial sector and real sector because the coefficient of multiple determinations is relatively high; thus suggesting that financial sector development is crucial for real sector productivity.

Extensive research was conducted on the effect of the global financial crisis on stock markets across the globe, but only a limited number focused attention on African stock markets. This study examined the impact of the global financial crisis on emerging stock market behaviour by providing evidence of the efficiency and volatility of the Nigerian stock market across different time periods. The period under review ranges between July 2004 and December 2014. It was sub-divided into the period before the crisis (July 2004–June 2007), the crisis period (July 2007–November 2011), and the period after the crisis (December 2011–December 2014). The generalised ARCH (GARCH) model was built to test for persistence of volatility shocks in the sub-sample periods, while an exponential GARCH (EGARCH) model was developed to determine asymmetry and persistence of volatility in the overall period. The study showed that price is a martingale in all sub-sample periods, except for the pre-crisis period. However, in the overall period, price is not a martingale – suggesting that the Nigerian stock market is not weak form efficient. In addition, there was evidence of long-term persistence in price volatility in the crisis, aftermath and overall periods. Holistically, this study found that the global financial crisis reduced stock prices, but did not have a significant impact on price volatility in the Nigerian stock market.

The relationship between stock price and foreign exchange (forex) rate has been a controversial issue over the years. This study examines the nexus between stock prices and forex rates in Nigeria from January 1985 to December 2014. It applies the Johansen co-integration, Toda-Yamamoto Granger non-causality and correlation tests. The empirical results reveal that there is presence of co-integration between stock prices and forex rates and unidirectional causality from forex rates to stock prices with positive correlation. This study did not validate the proposition of the portfolio-balance model in Nigeria but it provides substantiated evidence in favour of the traditional-flow model.

The financial sector provides services that have been identified as germane for the growth of an economy. The principal function of the financial sector is the movement of financial resources between different units in an economy through the process of financial intermediation. An economy suffers if the financial sector is not efficient. An efficient financial sector can only exist when development occurs in the financial sector. However, the supply-leading hypothesis assumes that financial development is the driver of economic growth. Thus this study inquires into whether the supply-leading hypothesis can be upheld in a developing economy, with particular reference to the Nigerian economic growth between 1981 and 2013. Using the Granger Pairwise causality test, it reveals that there is weak evidence in support of supply-leading hypothesis; rather, the demand-following hypothesis is dominant in the economy. However, the study suggests that there is bi-directional causality between financial development variables and indices of economic growth which thus confirms the existence of their interdependence in Nigeria context.