Banking development, human capital and economic growth in Sub-Saharan Africa (SSA)

Purpose – The purpose of this paper is to investigate the relevance of three economic growth theories in Sub-Saharan Africa economies. Design/methodology/approach – This empirical paper employs a panel data framework, using fixed effect, random effects and maximum likelihood estimation techniques. It further conducts some sensitivity analyses. Findings – The paper finds that both the stock of human capital (HC) and the physical capital are important for growth in the region, the paper does not find strong impact of financial development (FD) in the region, perhaps due to long period of financial repression or financial underdevelopment in the region. It however finds strong complementarity features in interaction of both finance and HC on growth. Research limitations/implications – The analysis in the paper is confined to banking development indicators, due to inadequate data for capital market indicators as well as underdevelopment of the stock market in the region. Practical implications – The policy regime since the mid-1980?s (Structural Adjustment Programme, SAP, era) is to reduce government investment and involvement in economic activities; this paper however suggests that this measure has to be carefully considered especially with due concern for the trade off between short-run adjustment programmes and long-run stabilisation policies. The paper advocates for more efficient and effective investment in HC and FD in the region. Originality/value – It is believed that this is the first time such a study has been carried out, testing the relevance of three growth theories