Revisiting Financial Development And Economic Growth In Sub-Saharan African Low-Income Countries: A Panel Data Approach

2020 ◽  
Vol 10 (3) ◽  
pp. p99103
Author(s):  
Placide Aime Kwizera
Keyword(s):  
Economic Growth ◽  
Panel Data ◽  
Financial Development ◽  
Low Income ◽  
Low Income Countries ◽  
Sub Saharan

scholarly journals The Finance Growth Link: Comparative Analysis Of Two Eastern African Countries

2016 ◽  
Vol 19 (3) ◽  
pp. 147-167 ◽  
Author(s):  
Ashenafi Beyene Fanta ◽  
Daniel Makina
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Financial Development ◽  
Low Income ◽  
Structural Breaks ◽  
Response Analysis ◽  
African Countries ◽  
Vector Autoregressive ◽  
Stock Market Development ◽  
Sub Saharan

This paper examines the finance growth link of two low-income Sub-Saharan African economies – Ethiopia and Kenya – which have different financial systems but are located in the same region. Unlike previous studies, we account for the role of non-bank financial intermediaries and formally model the effect of structural breaks caused by policy and market-induced economic events. We used the Vector Autoregressive model (VAR), conducted impulse response analysis and examined variance decomposition. We find that neither the level of financial intermediary development nor the level of stock market development explains economic growth in Kenya. For Ethiopia, which has no stock market, intermediary development is found to be driven by economic growth. Three important inferences can be made from these findings. First, the often reported positive link between finance and growth might be caused by the aggregation of countries at different stages of economic growth and financial development. Second, country-specific economic situations  and episodes are important in studying the relationship between financial development and economic growth. Third, there is the possibility that the econometric model employed to test the finance growth link plays a role in the empirical result, as we note that prior studies did not introduce control variables.

scholarly journals The Nexus between Financial Development and Economic Growth: Panel Data Evidence from Developing Countries

2021 ◽  
Vol 14 (10) ◽  
pp. 489
Author(s):  
E. M. Ekanayake ◽  
Ranjini Thaver
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Panel Data ◽  
Least Squares ◽  
Financial Development ◽  
Panel Cointegration ◽  
Sub Saharan Africa ◽  
Explanatory Variables ◽  
Cointegration Tests ◽  
Sub Saharan

The objective of this study is to investigate the nexus between financial development (FD) in economic growth (GROWTH) in developing countries. The study uses panel data from 138 developing countries during the period 1980–2018. The relationship between financial development and economic growth is investigated using four explanatory variables that are commonly used to measure the level of financial development and several other control variables, including a dummy variable representing the financial and banking crises. The sample of 138 developing countries is also classified into six geographic regions. We have carried out panel unit-root tests and panel cointegration tests before estimating the specified models using both Panel Least Squares (Panel LS) and Panel Fully Modified Least Squares (FMOLS) methods. In addition, panel Granger causality tests have been conducted to identify the direction of causality between FD and GROWTH for each of the regions. The results of the study provide evidence of a direct relationship between FD and GROWTH in developing countries. Furthermore, there is evidence of bi-directional causality running from FD to GROWTH and from GROWTH to FD in samples of Europe and Central Asia, South Asia, and all countries, but not in East Asia and Pacific, Latin America and the Caribbean, Middle East and North Africa, and Sub-Saharan Africa.

scholarly journals Does economic growth reduce childhood stunting? A multicountry analysis of 89 Demographic and Health Surveys in sub-Saharan Africa

2020 ◽  
Vol 5 (1) ◽  
pp. e002042 ◽  
Author(s):  
Sanni Yaya ◽  
Olalekan A Uthman ◽  
Michael Kunnuji ◽  
Kannan Navaneetham ◽  
Joshua O Akinyemi ◽  
...  
Keyword(s):  
Economic Growth ◽  
Low Income ◽  
Random Effect ◽  
Sub Saharan Africa ◽  
Low Income Countries ◽  
Gdp Per Capita ◽  
Demographic And Health Surveys ◽  
Per Capita ◽  
Sub Saharan ◽  
Childhood Stunting

BackgroundThere is mixed evidence and lack of consensus on the impact of economic development on stunting, and likewise there is a dearth of empirical studies on this relationship in the case of sub-Saharan Africa. Thus, this paper examines whether economic growth is associated with childhood stunting in low-income and middle-income sub-Saharan African countries.MethodsWe analysed data from 89 Demographic and Health Surveys conducted between 1987 and 2016 available as of October 2018 using multivariable multilevel logistic regression models to show the association between gross domestic product (GDP) per capita and stunting. We adjusted the models for child’s age, survey year, child’s sex, birth order and country random effect, and presented adjusted and unadjusted ORs.ResultsWe included data from 490 526 children. We found that the prevalence of stunting decreased with increasing GDP per capita (correlation coefficient=−0.606, p<0.0001). In the unadjusted model for full sample, for every US$1000 increase in GDP per capita, the odds of stunting decreased by 23% (OR=0.77, 95% CI 0.76 to 0.78). The magnitude of the association between GDP per capita and stunting was stronger among children in the richest quintile. After adjustment was made, the association was not significant among children from the poorest quintile. However, the magnitude of the association was more pronounced among children from low-income countries, such that, in the model adjusted for child’s age, survey year, child’s sex, birth order and country random effect, the association between GDP per capita and stunting remained statistically significant; for every US$1000 increase in GDP per capita, the odds of stunting decreased by 12% (OR=0.88, 95% CI 0.87 to 0.90).ConclusionThere was no significant association between economic growth and child nutritional status. The prevalence of stunting decreased with increasing GDP per capita. This was more pronounced among children from the richest quintile. The magnitude of the association was higher among children from low-income countries, suggesting that households in the poorest quintile were typically the least likely to benefit from economic gains. The findings could serve as a building block needed to modify current policy as per child nutrition-related programmes in Africa.

scholarly journals Government Expenditure and Economic Growth in Sub-Saharan Africa

2021 ◽  
Vol 7 (4) ◽  
pp. p14
Author(s):  
Dickson Wandeda ◽  
Wafula Masai ◽  
Samuel M. Nyandemo
Keyword(s):  
Economic Growth ◽  
Panel Data ◽  
Low Income ◽  
Government Expenditure ◽  
Output Growth ◽  
Sub Saharan Africa ◽  
Middle Income ◽  
Sub Saharan ◽  
The Impact ◽  
Ssa Countries

The paper sought to investigate the effect government expenditure on economic growth in Sub-Saharan Africa using a panel data for 35 Sub-Saharan African countries for the period 2006-2018. The paper adopted dynamic panel data and estimates were achieved by using two-step system GMM while taking into account the problem of instrument proliferation. The paper provided evidence that education and health expenditure are key determinants of income growth for SSA. The impact of education spending on cross-country income variation is more effective in low income SSA countries than the middle income SSA countries. However, military expenditure on output growth is more effective in improving income level of middle income SSA countries than low income SSA countries. SSA countries should allocate more funding towards education sector and should also avail compulsory and free primary and secondary education. SSA should carry out health reforms which improve primary health and universal health insurance coverage.

How financial development and economic growth influence human capital in low-income countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Ali ◽  
Syed Ali Ali Raza ◽  
Chin-Hong Puah ◽  
Shamim Samdani
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Financial Development ◽  
Low Income ◽  
Random Effect ◽  
Random Effect Model ◽  
Unit Root Test ◽  
Low Income Countries ◽  
Analysis Tool ◽  
Content Type

PurposeThis research aims to explain the effect of financial indicators and economic growth on human capital in low-income countries.Design/methodology/approachWe gathered balanced panel data from 1980 to 2016 over a sample of 12 low-income countries categorized by World Development Indicators. The data stationary properties were analyzed by unit root test while the existence of a long-run relationship among the variables was confirmed by cointegration test. We performed Hausman test to differentiate between the fixed effect and random effect model. The sensitivity analysis confirmed the robustness of the results.FindingsOur findings indicated that broad money supply and private sector credit has a positive and significant impact on human capital. Interestingly, bank credit showed a negative and significant effect on human capital. We also found a significant positive relationship between human capital and economic growth in the study sample.Originality/valueThis is a preliminary study using financial development and human capital in low-income countries with panel econometric techniques as an analysis tool. Overall, we suggest a policy to focus on the financial sector development and economic growth to produce sustainable human capital.

The Effects of Financial Development and Governance Quality on Economic Growth: Evidence from Developed and Developing Countries

2021 ◽  
Vol 40 (1) ◽  
Author(s):  
Assef Filfilan
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Financial Development ◽  
Low Income ◽  
Good Governance ◽  
Principal Component ◽  
Threshold Level ◽  
Low Income Countries ◽  
Domestic Credit ◽  
Governance Quality

This paper investigates the effects of financial development on economic growth with especial emphasis on the role played by governance quality. An indicator of governance built from the Principal Component factor method (PCF) and which takes into account the simultaneous effects of political, institutional and economic governance, is used in mediating such relationship. The study is carried out using a two-step system dynamic GMM method for 93 developed and developing countries over the 1996–2018 period. The findings from the study revealed that the effects of financial development on economic growth various according to the nature of governance and the level of development of countries.  Results show a non-significant effect of financial development on economic growth for low-income countries and a positively significant impact in middle and high-income ones. Estimations demonstrate also that good governance plays an important and significant role in mediating the finance-growth relationship. Finally, results demonstrate that there is a certain threshold level that countries must achieve to make government domestic credit to private sector favorable to economic growth.

scholarly journals The laffer curve and the debt-growth link in low-income Sub-Saharan African economies

2015 ◽  
Vol 42 (5) ◽  
pp. 878-892 ◽  
Author(s):  
Kelbesa Abdisa Megersa
Keyword(s):  
Economic Growth ◽  
Low Income ◽  
Public Debt ◽  
Sub Saharan Africa ◽  
Low Income Countries ◽  
Positive Contribution ◽  
Content Type ◽  
Laffer Curve ◽  
Negative Effect ◽  
Sub Saharan

Purpose – The study of the link between debt and growth has been full of debates, both in theory and empirics. However, there is a growing consensus that the relationship is sensitive to the level of debt. The purpose of this paper is to address the question of non-linearity in the long-term relationship between public debt and economic growth. Specifically, the author set out to test if there exists an established “laffer curve” type relationship, where debt contributes to economic growth up to a certain point (maximal threshold) and then starts to have a negative effect on growth afterwards. Design/methodology/approach – To carry out the tests, the author has used a methodology that delivers a superior test of inverse U-shapes (Lind and Mehlum, 2010), in addition to the traditional test based on a regression with a quadratic specification. Findings – The results in the paper present evidence of a bell-shaped relationship between economic growth and total public debt in a panel of low-income Sub-Saharan African economies. This supports the hypothesis that debt has some positive contribution to economic growth in low-income countries, albeit up to a point. Practical implications – The overall result supports the claim that public debt may start to be a drag on economic growth if it goes on increasing beyond the level where it would be sustainable. Originality/value – This paper leads the way by implementing a robust test of non-linearity (“inverse-U” test) to the analyses the debt-growth nexus and the laffer curve in Sub-Saharan Africa.

scholarly journals Finance-growth nexus in sub-Saharan Africa

2021 ◽  
Vol 24 (1) ◽  
Author(s):  
Celsa M.D.C. Machado ◽  
António F.M.G. Saraiva ◽  
Paulo D.D. Vieira
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Low Income ◽  
Developed Countries ◽  
Dynamic Panel Data ◽  
Policy Implications ◽  
Sub Saharan Africa ◽  
Empirical Literature ◽  
African Countries ◽  
Sub Saharan

Background: There is now significant empirical literature suggesting that finance is good for growth only up to a threshold level of financial development, becoming harmful after that level, in developed and developing countries.Aim: This study extends this literature that investigates non-linearities on the finance-growth link, by testing the inverted U-shape hypothesis in sub-Saharan African countries, which are among the least developed ones.Setting: 36 countries from sub-Saharan Africa over the period 1980–2015.Method: Estimation of quadratic dynamic panel data models by system-generalised method of moments.Results: Empirical results show that there is a hump-shaped relationship between financial development and economic growth in sub-Saharan African countries.Conclusion: Results suggest that the hypothesis of ‘too much finance harms economic growth’ also holds for low-income and less developed countries, but for much lower threshold levels of financial development than those of more developed and higher-income countries. As for policy implications, measures to strengthen finance quality and other growth-enhancing strategies need to be undertaken, rather than increasing finance size.

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