Financial Development And Economic Growth Revisited: Evidence from the Case of Selected Sub-Sahara African Countries
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Date
2016-06
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Addis Ababa University
Abstract
The finance – growth nexus, though it is well-entrenched in the academic discourse and no consensus is reached, still begs for updating through revisiting the issue using recent data. With this motivation, this paper has attempted to achieve two paramount objectives: examining the effect of economic growth on the development of the financial system and investigating the effect of other variables which were presumed and simultaneously supported by substantial body of literature to have significant effect on economic growth; a case from 20 selected sub-Sahara African region. Pertaining to this, first using annual data of 20 selected sub-Sahara African countries were collected and transformed in to five years averaged longitudinal data form, we applied multilevel mixed effects regressions (MMER). The results from the mixed effect regression revealed that, there is a significant and positive effect of economic growth, geographic location allotting sea door, macroeconomic stability, investment and domestic savings. On the contrary, negative relationship was observed between foreign legal system origination and financial development. The evidence under the probe on the effect of demographic situations have two effects comprising both direct relationship with financial depth and indirect effects on the efficiency of the financial system. Finally this paper has ended up suggesting further detailed research on the effects of demographic situations on financial development; additionally to examine the finance growth nexus and give microeconomic evidence.
Key words: financial depth, efficiency of financial system, economic growth, multilevel mixed effect regression, microeconomic evidence.
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Keywords
financial depth, efficiency of financial system, economic growth, multilevel mixed effect regression, microeconomic evidence