An Examination of Drivers of Financial Development: Evidence in West African Countries (original) (raw)
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The financial sector development in developing countries and emerging markets is part of the private sector development strategy to stimulate economic growth and poverty reduction. It could be defined that, the financial sector is the set of institutions, instruments, and markets. This study analyzes the financial development and economic growth in West Africa with the main focus on financial development. The data were obtained from the world bank open data page website to estimate the financial development using dynamic panel data approach. The results show that official development assistance and broad money statistically has a significant impact on financial development in West Africa. It is therefore imperative that policymakers should implement policies that may attract official development assistance and broad money through regional stability, infrastructural improvement and creditors right reinforcement. It is also important to introduce reforms in the financial sector which ...
The Review of Finance and Banking, 2010
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Volume 16, Issue 1, January-March 2025 , 2025
This study examines the relationship between financial development and economic growth in seven countries of the Economic Community of West African States (ECOWAS) from 1970 to 2018. Vector autoregression and the Granger causality method were employed in this study to reveal the impact of financial development on investment, which is essential for long-term economic growth. In our study, investment, credit to the private sector, broad money, foreign direct investment, general government final expenditures, foreign trade, and savings are used as variables. The results of the analysis reveal that financial development indicators have a positive effect on investment. However, the degree of this effect differs from country to country. Credit to the private sector and broad money, which are indicators of financial development in some countries, have a low impact on investment, while in other countries, the impact is strong. Regarding Granger causality, four different results werefound across the countries:a bidirectional causality between financial development and investment, a unidirectional causal flow from investment to financial development, a unidirectional causal flow from financial development indicators to investment, and no causality between financial development and investment.
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The paper investigates the relationship between financial development and economic growth in seven Sub-Saharan Africa countries. Using the panel Granger causality test, the study finds oneway causality running from economic growth to bank developing indicators and a two-way causality between stock market development indicators and economic growth. The fixed-effects estimation shows stock market development has positive and significant effect on economic growth while banking development indicators impact on economic growth is uncertain. Control variables including capital formation, schooling, and life expectancy have positive effect on economic growth. Based on these findings, the study suggests for adoption of policies that create favorable environment for financial market development including efforts to integrate the small capital markets.