The effect of financial liberalization On economic growth: panel data Evidence from selected IGAD countries
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Date
2018-06
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Addis Ababa University
Abstract
Finance nexus growth deep-rooted well in academic discourse. The relationship between both
has been hotly debated since 1970 and no consensus is reached. The relationship between
financial liberalization policies and economic growth is controversial. Effect of financial
liberalization differs among countries. This paper attempts to examine the effect of financial
liberalization on economic growth of four selected IGAD countries (Djibouti, Ethiopia, Kenya
and Uganda) selection of these four countries out of seven countries in the region is based on
availability of the data. The study used quantitative research design. In order to achieve the
objective of the study, panel data were used for the period of 2007-2016. Data were analyzed on
quantitative basis using descriptive and regression analysis (Ordinary Least Square) method.
Fixed effect model was employed in the regression. The obtained result from fixed regression
reveled that exchange rate and degree of openness were statistically significant and have
positive relationship with economic growth. On the contrary, variables like lending rate and
financial deepening were statistically significant and have negative relationship with economic
growth. Inflation has positive relationship with economic growth nevertheless it is statistically
insignificant. From the result, trade openness would no doubt enhance economic growth and the
government in the region has to intensify efforts that provide better financial system.
Description
A research project submitted in partial Fulfillment of the requirements for the award of business administration
Keywords
Economic Growth, Financial Liberalization, Panel Method