Does Financial Liberalization Stimulate Economic Growth and Reduce Poverty in Six Sub-Saharan African Countries

This paper examines the linkage between financial liberalization, economic growth and poverty reduction in Sub-Saharan African countries (SSA). The study apply the recent panel Co-integration and vector error correction mechanism to address the heterogeneity and cross-border interdependence over the period of 1980 to 2010. The results reveal that economic growth is positively associated with poverty reduction and financial liberalization coefficients are positively related to economic growth. This implies that financial liberalization causes economic growth. However, the coefficients of financial liberalization are not significant in the poverty equation, which suggests that financial liberalization does not have direct impact on poverty reduction in the six Sub-Saharan African countries. This implies that the financial liberalization effects of poverty are upon contingent on the distributional changes introduced by the growth and the configuration of institutions and policies accompanying the liberalization process and the existence of good governance