scholarly journals Causal Relationship Between Financial Sector Development in SMEs & Economic Growth in Southern Africa Region

2021 ◽  
Vol 18 ◽  
pp. 996-1018
Author(s):  
Abigail Chivandi ◽  
Happiness Makumbe ◽  
Olorunjuwon Samuel
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Financial Development ◽  
Financial Sector ◽  
Causal Connection ◽  
Financial Sector Development ◽  
Bidirectional Relationship ◽  
Causality Tests ◽  
Annual Time Series ◽  
Development Support

This study explores causal relationship between financial sector development in SMEs and economic growth in Zimbabwe using annual time series and the Error Correction Model (ECM) framework. Monetary sector improvement and financial development stayed a controversial issue in Southern African nations. Market analysts have distinctive hypothetical and exact perspectives on the causal connection between monetary sector improvement and financial development. support supply driving speculation that monetary sector improvement prompts financial development & credit to request pulling speculation which proposes that monetary improvement results from financial development. Study made use of Unit Root Tests, Cointegration, ECM and Granger Causality Tests. Empirical findings revealed a bidirectional relationship between financial sector development in SMEs, economic & business growth. Business & Economic Growth enhance a strong and flexible legal system allowing banks to allocate resources (credit) more efficiently to SMEs. Credit should be accessed by all enterprise fairly to encourage the development of indigenous businesses through SMEs.

scholarly journals Financial Development, Savings and Investment in South Africa: A Dynamic Causality Test

2017 ◽  
Vol 17 (3) ◽  
pp. 20170042 ◽  
Author(s):  
Brian Muyambiri ◽  
Nicholas Odhiambo
Keyword(s):  
South Africa ◽  
Causal Relationship ◽  
Granger Causality ◽  
Financial Development ◽  
Financial Sector ◽  
Policy Implications ◽  
Bounds Testing ◽  
Causality Test ◽  
Development Indicators ◽  
Financial Sector Development

This study investigates the causal relationship between financial development and investment in South Africa during the period from 1976 to 2014. The study incorporates both bank-based and market-based segments of financial sector development. In addition, composite indices for bank-based and market-based financial development indicators are used as explanatory variables. The study incorporates savings as an intermittent variable – thereby creating a simple trivariate Granger-causality model. Using the ARDL bounds testing approach to cointegration and the ECM-based Granger-causality test, the study finds a unidirectional causal flow from investment to financial development, but only in the short run. In the long run, the study fails to find any causal relationship between financial development and investment. These results apply irrespective of whether bank-based or market-based financial development is used as a proxy for financial sector development. The findings of this study have important policy implications.

scholarly journals Inflation and Financial Sector Performance: The Case of Nigeria

2014 ◽  
Vol 7 (1) ◽  
pp. 55-69 ◽  
Author(s):  
R. Santos Alimi
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Financial Sector ◽  
Macroeconomic Performance ◽  
Financial Sector Development ◽  
Long Run ◽  
Negative Effect ◽  
Short Run ◽  
Sector Performance ◽  
Definition Of

Abstract The paper examines the long run and short run relationships between inflation and the financial sector development in Nigeria over the period between 1970 and 2012. Three variables, namely; broad definition of money as ratio of GDP, quasi money as share of GDP and credit to private sector as share of GDP, were used to proxy financial sector development. Our findings suggest that inflation presented deleterious effects on financial development over the study period. The main implication of the results is that poor macroeconomic performance has deleterious effects to financial development - a variable that is important for affecting economic growth and income inequality. Moreover, we observed a negative effect of the measures of financial development on growth, suggesting that impact of inflation on the economic growth passes through financial sector. Therefore, low and stable prices, is a necessary first step to achieving a deeper and more active financial sector that will enhance growth as predicted by Schumpeter.

scholarly journals Financial Development and CO2 Emissions in Post-Transition European Union Countries

2020 ◽  
Vol 12 (7) ◽  
pp. 2640 ◽  
Author(s):  
Yilmaz Bayar ◽  
Laura Diaconu (Maxim) ◽  
Andrei Maxim
Keyword(s):  
Economic Growth ◽  
Energy Consumption ◽  
Co2 Emissions ◽  
Financial Development ◽  
Carbon Dioxide Emissions ◽  
Panel Cointegration ◽  
Financial Sector ◽  
Primary Energy ◽  
Primary Energy Consumption ◽  
Financial Sector Development

Carbon dioxide emissions are on the rise, posing a serious global issue. Therefore, it is important that policymakers identify the exact causes of these emissions. This paper investigates the influence of financial development, primary energy consumption, and economic growth on CO2 emissions in 11 post-transition European economies. The assessment was made for the 1995–2017 period using panel cointegration and causality analyses. The causality analyses did not reveal significant connection between financial sector development and CO2 emissions, but rather a two-way causality between primary energy consumption and economic growth, on one hand, and CO2 emissions on the other. Meanwhile, long-run analysis disclosed that financial sector development and primary energy consumption positively affected CO2 emissions. Our results seek to grab the attention of policy makers, who could work towards creating country-specific strategies that balance the relationship between financial development and CO2 emissions. These long-term policies could ensure both development of the financial sector and environmental protection.

scholarly journals The Relationship between Financial Sector Development and Economic Growth in Nigeria: Cointegration with Structural Break Approach

2019 ◽  
Vol 8 (5C) ◽  
pp. 1081-1088
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Financial Development ◽  
Structural Break ◽  
Financial Sector ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Vector Error Correction ◽  
Financial Sector Development ◽  
Vector Error

This research investigates the relationships between the financial sector development and economic growth in Nigeria, using annual time series data for the period between 1981 to 2015. This research examines the long-run relationship between the financial sector development and the economic growth in Nigeria, and applies the Gregory and Hansen (1996a, b) cointegration approach with one endogenously determined structural break and the vector error correction model. This research finds out that, there exist cointegration among the financial development, trade openness and economic growth with structural break date in 2010 and the results from the vector error correction model finds there is significant and negative relationship between financial development and the economic growth in Nigeria in the study period. In addition, the findings of this study indicate that accounting for structural break in VECM improves the significance and thus reliability of the model applied. The estimated model is found to have passed diagnostic tests and is found to be stable. The paper recommends that to achieve the desired economic growth level financial development should be supported with other proactive measures such as sound institution and basic infrastructure to complement the effort of financial sector reforms. Moreover, future analysis should always consider the structural breaks while conducting macroeconomic empirical analysis as it helps in avoiding having spurious results

Financial development, economic growth and millennium development goals in South Africa

2015 ◽  
Vol 42 (5) ◽  
pp. 459-479 ◽  
Author(s):  
Oludele Akinloye Akinboade ◽  
Emilie Chanceline Kinfack
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Financial Development ◽  
Millennium Development Goals ◽  
Financial Sector ◽  
Development Economic ◽  
Content Type ◽  
Financial Sector Development ◽  
Development Goals ◽  
The Relationship

Purpose – The purpose of this paper is to empirically report the findings on the relationship between financial sector development, economic growth and of millennium development goals (MDGs) for poverty reduction, education and health development in South Africa. Design/methodology/approach – The autoregressive distributed lag bounds testing technique was applied to two indicators of financial development, economic growth and four indicators of MDGs. Findings – Economic growth and MDGs jointly cause financial development. Similarly, economic growth and financial sector development jointly cause the attainment of MDGs. The attainment of MDGs such as increased per capita expenditure on food and education as well as economic growth jointly cause financial development. Practical implications – The findings highlight the complexity of the relationship between financial development, economic growth and MDGs. It is essential that the government of South Africa pursue a three track strategy of promoting financial sector development, economic growth and MDGs. The development of one strategy causes and is caused by the development of the other two. Originality/value – Relationships between financial development, economic growth and MDG targets are unsettled in the literature. This paper studies the link between the three variables in South Africa. Hence, the contribution of this study is to enrich the understanding of this important field in the context of an important African country.

The Role of Financial Sector Development in the Tourism- Growth Nexus: A Case of Southern African Countries

2018 ◽  
Vol 10 (3(J)) ◽  
pp. 100-110
Author(s):  
Kunofiwa Tsaurai
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Random Effects ◽  
Financial Management ◽  
Fixed Effects ◽  
Panel Data Analysis ◽  
Financial Sector ◽  
Empirical Literature ◽  
Financial Sector Development ◽  
The Impact

The study explored the impact of financial development on the tourism -growth nexus in Southern African (SADC) countries using the three panel data analysis approaches (pooled OLS, fixed and random effects). Specifically, the study investigated whether financial development is a channel through tourism influences economic growth in SADC countries or if the complementarity between financial development and tourism has a significant positive impact on economic growth in the SADC region? Theoretical and empirical literature review shows that the positive separate impact of tourism and financial development on economic growth is no longer a disputed matter. What has so far not been conclusively studied is whether financial management is a channel through which tourism influences economic growth. It is against this backdrop that the author undertook the current study in order to make a contribution to literature. The study found out that tourism had a significant negative influence on economic growth whereas financial development positively and significantly affected economic growth in the SADC region. The complementarity between tourism and financial development had a positive (fixed effects) and significant positive influence (pooled OLS and random effects) on economic growth in SADC countries, in line with theoretical predictions. SADC countries are therefore urged to improve their financial sector development levels in order to enhance the impact of tourism on economic growth. 

scholarly journals Financial Intermediaries Versus Financial Markets: A South African Experience

2011 ◽  
Vol 10 (2) ◽  
Author(s):  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Stock Market ◽  
Causal Relationship ◽  
Financial Development ◽  
Financial Sector ◽  
Market Development ◽  
Stock Market Development ◽  
African Experience ◽  
Causality Model

In this paper, a dynamic causal relationship between stock market development, bank-based financial development and economic growth in South Africa is examined during the period 1980:1-2007:3, using a trivariate Granger causality model. The study attempts to answer two critical questions. Does financial sector development Granger cause economic growth? Which sector leads in the process of financial development in South Africa – bank-based sector or stock market sector? Using a cointegration-based error-correction mechanism, the empirical results reveal that there is a distinct unidirectional causal flow from stock market development to bank development. The results also indicate that there is a bi-directional causal relationship between stock market development and economic growth.  Similar results were also found on the causality between bank-based financial development and economic growth. The study, therefore, concludes that whilst both financial development and economic growth Granger cause each other, the development of the financial sector in South Africa is largely driven by the stock market activities.

scholarly journals Financial Development, Economic Growth, and Poverty Reduction (The Mahbub ul Haq Memorial Lecture)

2000 ◽  
Vol 39 (4) ◽  
pp. 363-388 ◽  
Author(s):  
Colin Kirkpatrick
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Financial Development ◽  
Financial Market ◽  
Poverty Reduction ◽  
Financial Sector ◽  
Development Economic ◽  
Memorial Lecture ◽  
Financial Sector Development ◽  
Financial Liberalisation

The frequent failure of financial liberalisation efforts in developing countries, and the serious damage which recent financial crises have imposed on these economies, have led to renewed attempts to understand the relationships between financial sector development, economic growth and poverty reduction, and to provide a more robust intellectual foundation on which to design efficient and pro-poor financial sector policies for developing countries. The paper examines the contribution that financial sector development can make to poverty reduction in developing countries. The linkages between financial and economic growth, and between economic growth and poverty reduction, are considered, and some preliminary empirical evidence is presented on these linkages. The paper goes on to argue that financial market imperfections are a key constraint on pro-poor growth, and that public policy directed at the correction of these financial market failures is needed to ensure that financial development contributes effectively to growth and poverty reduction. The final part of the paper examines in some detail the role of financial regulation and supervision policy as a key area for public intervention directed at enhancing the financial sector’s contribution to poverty reduction.

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