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The study examined financial development and economic growth in the context of the Nigerian banking system using the Toda-Yamamoto approach to Granger causality to test whether the relationship between financial development and economic growth follows the pattern of supply-leading and demand-following hypothesis propounded by Patrick (1966). The financial development indicators of the banking system, which depicts financial deepening and stability for the period 1960 to 2019 were utilised. The findings of the study showed that the relationship between financial development and economic growth was neither supply-leading nor demand-following for the sub-periods of 1960-1985 and 1986-2019. However, for the entire period of 1960-2019, the demand-following hypothesis was established, suggesting that in Nigeria economic growth granger cause financial development. This implied that financial development stemming from the banking system does not drive economic growth in Nigeria. In view of this, it was recommended that efforts be made by government to diversify and fast-track development in the economy to ensure that financial development impacts on economy.
This paper examines the empirical relationship between long–run growth and the degree of financial development, proxied by the ratio of bank credit to the private sector as a fraction of GDP. We find that this proxy enters significantly and with a positive sign in growth regressions on a large cross–country sample, but with a negative sign using panel data for Latin America. Our findings suggest that the main channel of transmission from financial development to growth is the efficiency of investment, rather than its volume. We also present a model where the negative correlation between financial intermediation and growth results from financial liberalization in a poor regulatory environment.
The study was undertaken with the objective of examining the causal relationship between financial sector performance and economic development vis-a-vis growth of Nigeria. The variables used were GDP, Human Development Index (HDI), which represents the dependent variables for the two models. For the independent variables, Credit to the Private Sector (CPS) which represents the credit activity of the financial sector; Interest Rate Spread (IRS) which represents the efficiency, competition and concentration of the financial sector; Market Turnover Ratio (TR) which represents the liquidity of the financial sector; Other variables that influence economic growth and development were introduced Inflation (INF) and Total Government Expenditure (GE). Moreover, the study period covers 1996 to 2016 and the data collected within the period was analysed using ADF Test and Granger Causality Test. The results showed that IRS causes economic growth which conforms to the supply leading hypothesis theory; but GDP causes financial sector performance through the Credit to Private Sector (CPS), which means the more the economy grows financial sector performance through its credit allocation function increases. This conforms to the demand following hypothesis theory. However, the overall financial sector performance couldn't facilitate effective economic growth vis-à-vis economic development in Nigeria. Thus, regulatory bodies of the financial sector should set or implement monetary policy program that would be favourable for the efficient operations of financial institutions.
This is the first comprehensive book on the politics and economics of financial sector consolidation in an emerging market in West Africa. It draws on the author's twenty years experience working with multinationals in this oil-rich zone, to address key issues and examine banking reform in one of the world's fastest-growing economies.
Economics is about understanding the rational behaviour of economic agents (households, firms, industries and government) in their decisions to achieve best outcomes of their goals and aspirations. They collectively converge to achieve the utmost economic and social benefits for all in the country in terms of economic growth and development. Economic growth and development occur through efficient use of available resources to meet effective demand and social needs. The challenge that countries are facing is proper application of appropriate policy mix to optimize the opportunities of increasingly interdependent global economic landscape. For emerging economies, a multiple sector strategy that propels economic transformation is crucial. This needs to be predicated on robust macroeconomic policy framework that aligns with global production and consumption activities to drive economic growth process for achieving sustainable development.
Financial repression (legal restrictions on interest rates, credit allocation, capital movements, and other financial operations) was widely used in the past but was largely abandoned in the liberalization wave of the 1990s, as widespread support for interventionist policies gave way to a renewed conception of government as an impartial referee. Financial repression has come back on the agenda with the surge in public debt in the wake of the Global Financial Crisis, and some countries have reintroduced administrative ceilings on interest rates. By distorting market incentives and signals, financial repression induces losses from inefficiency and rent-seeking that are not easily quantified. This study attempts to assess some of these losses by estimating the impact of financial repression on growth using an updated index of interest rate controls covering 90 countries over 45 years. The results suggest that financial repression poses a significant drag on growth, which could amount to 0.4-0.7 percentage points.
Although a number of selected African countries have made efforts to implement various financial sector reforms, many countries have not fully implemented the requisite reforms required for sustainable development. Instead, they have focused mainly on bank-based financial reforms, thereby neglecting market-based financial reforms. This study provides a one-stop shop for understanding the history and evolution of the financial sector in Africa with a special focus on the sub-Saharan region where the financial system in many countries is still at a relatively nascent stage. The analysis is extensive and robust, and starts from financial repression to financial liberalisation (both internal and external), and its role in sustainable development and poverty alleviation. The book covers a range of important research issues pertaining to financial development in selectede African countries, including interest rate and exchange rate reforms, the dynamics of bank-based and market-based financial development; the role of the informal financial sector in sustainable development; the finance-growth nexus; bank-based versus market-based financial sectors in Africa; financial development and information and communication technology; and financial development and gender equality, among other topics. The book also considers the relationship between the COVID-19 global pandemic and financial development, and concludes by presenting a forecast of the future trends of financial and sustainable development on the African continent in general and sub-Saharfan Africa in particular. The chapters are authored by prominent scholars and researchers in the field of finance and banking, applied econometrics and development economics, with a deep understanding and knowledge of financial development and the local situations in African countries. This book provides crucial reference material for academics, researchers, policymakers and students of all levels and is a must-read for anyone wishing to understand the nature of finance and sustainable development in Africa in relation to the rest of the world. It covers African countries, but with more emphasis on the sub-Saharan African region where the financial systems in many of the countries are still relatively underdeveloped.
This new database of indicators of financial development and structure across countries and over time unites a range of indicators that measure the size, activity, and efficiency of financial intermediaries and markets.