Financial development and economic growth: literature survey and empirical evidence from sub-Saharan African countries

By Songul Kakilli Acaravci, Ilhan Ozturk, Ali Acaravci. 2011

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In this paper we review the literature on the finance-growth nexus and investigate the causality between financial development and economic growth in sub-Saharan Africa for the period 19752005. Using panel co-integration and panel GMM estimation for causality, the results of the panel co-integration analysis provide evidence of no long-run relationship between financial development and economic growth. The empirical findings in the paper show a bi-directional causal relationship between the growth of real GDP per capita and the domestic credit provided by the banking sector for the panels of 24 sub-Saharan African countries. The findings imply that African countries can accelerate their economic growth by improving their financial systems and vice versa.

Subfields: Economics and Econometrics, Information Systems

View Paper: https://www.semanticscholar.org/paper/3f5f7b2bec5c84529977e43fc40c60f121487e20