Financial development and economic growth : a comparative study between Cameroon and South Africa
The causal relationship between financial development and economic growth is acontroversial issue. For developing countries, empirical studies have provided mixedresult. This study seeks to empirically explore the relationship and the causal linkbetween financial development and economic growth in two sub-Saharan Africancountries between 1970 and 2006. The empirical investigation is carried out using timemethods and the five most commonly used indicators of financial development in theliterature. However, the causal relationship was carried out using two different methodswhich are the autoregressive distributed lag bounds testing (ARDL) and the vector errorcorrection model (VECM). Using this above methodology the study first found that inboth countries there is a positive and long-term relationship between all the indicators offinancial development and economic growth which was proxied by the real per capitaGDP. With respect to the causality test, the two methods used provide mixed resultsespecially in South Africa. In Cameroon the study found that financial developmentcauses economic growth using the two methods, whereas in South Africa economicgrowth causes financial development when the VECM method is used, while there is anindependence relationship between the two variables in South Africa when using ARDL.
Year of publication: |
2009-04
|
---|---|
Authors: | Djoumessi, Emilie Chanceline Kinfack |
Subject: | Financial development | Economic growth | Vector autoregression model | Co-integration test | Causality test | Auto-regressive distributed lag | Finance | Economic development |
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