The causal relationship between financial development and economic growth in Africa

Eric Evans Osei Opoku, Muazu Ibrahim, Yakubu Awudu Sare

Research output: Journal PublicationArticlepeer-review

31 Citations (Scopus)

Abstract

Previous empirical studies on the causal relationship between financial development and economic growth are not instructive given their failure to unearth the causality trend across the different time periods. Using a more recently developed and robust indicator of financial development, we revisit the causal relationship between financial development and economic growth within the framework of a frequency-domain spectral causality technique which allows the causality to vary across time. Using data from 47 African countries over the period 1980–2016, our findings largely suggest that, even though there is some evidence of demand-following, supply-leading and feedback hypotheses, for most part, we find strong support of neutrality hypothesis. Thus, financial development and economic growth at most frequency levels evolve independently. We infer that caution must be exercised in making general conclusions about the causal nexus between financial development and economic growth.

Original languageEnglish
Pages (from-to)789-812
Number of pages24
JournalInternational Review of Applied Economics
Volume33
Issue number6
DOIs
Publication statusPublished - 2 Nov 2019
Externally publishedYes

Keywords

  • Africa
  • Financial development
  • causality
  • economic growth
  • frequency domain

ASJC Scopus subject areas

  • Economics and Econometrics

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