ARTICLES

 

Financial development and economic growth: Literature survey and empirical evidence from sub-Saharan African countries¹

 

 

Songul Kakilli Acaravci^I; Ilhan Ozturk^II; Ali Acaravci^I

^IFaculty of Economics and Administrative Sciences, Mustafa Kemal University, Turkey
^IIFaculty of Economics and Administrative Sciences, Cag University, Turkey

 

 

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ABSTRACT

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 1975-2005. 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.

Key Words: Financial development, growth, panel causality, sub-Saharan Africa

JEL C33, O11, O16, O55

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1 Acknowledgement: The authors are very grateful for the comments of the two anonymous referees, which have significantly improved the depth of analysis of the paper. We also thank the Editor of the journal for his encouragement. The usual disclaimer applies and views are solely those of the authors.