Financial Development and Economic Growth : Evidence from Nigeria

This paper examines the long-run relationship between financial development and economic growth in Nigeria using annual time series for the period 1960-2005. Multivariate Vector Autoregressive (VAR) technique is applied to examine the long-run relationship between financial development, growth and other determinants of growth through tests of exact and overidentifying restrictions in cointegrating vectors. The empirical results suggest the existence of unidirectional causality from financial development to economic growth when bank credit to the private sector (LBCP) is used as a measure of financial development. However, the other two measures of financial development, domestic credit to the private sector (LDCP) and bank deposit liabilities (LBDL), indicate bidirectional relationship between financial development and economic growth