Financial liberalization, financial development and growth in Sub-Saharan Africa's economic reform : an empirical investigation
conference contributionposted on 06.12.2017, 00:00 by Abdullahi Ahmed
This paper uses the recent development in unit root tests and cointegration as applied to panel data and dynamic time series to estimate the relationship between financial liberalization, financial development and growth. We utilize data from 15 Sub-Saharan African countries and use the ratio of private sector credit and share of domestic credit to income as indicators of financial development. The results obtained from a hetrogenous panel investigation and times series methodology such as Granger causality indicate a long-run equilibrium relationship between financial development and economic growth. This is consistent with the view that financial development can act as an ‘engine of growth’ and plays a crucial role in the process of economic development. However, there is little evidence to support the hypothesis that financial liberalization directly ‘leads’ growth.