Economic Union, Finance and Growth: A Prognosis in West Africa

African Development Review

2021

Self Cite

This paper examines the nexus between tourism, financial development and economic growth in 31 African countries using the Dumitrescu–Hurlin Granger non‐causality test that accounts for heterogeneity and cross‐sectional dependence. It also employs the Granger causality test in the frequency domain that distinguishes between temporary and permanent causality for the country‐specific analysis. It shows a cointegration relationship between tourism, financial development and economic growth. It reveals a joint long‐run causality from tourism and financial development to economic growth, and a joint short‐run and long‐run causality from tourism and economic growth to financial development, albeit the joint causality from financial development and economic growth to tourism is tenuous. The individual causality shows a bidirectional causality between tourism and economic growth, between financial development and economic growth, and between tourism and financial development. The country‐specific analysis reveals that tourism is a significant predictor of financial development and economic growth at high frequency rather than at low frequency in most countries. Therefore, African countries should prioritize the policies and programs that can facilitate the development of the tourism and financial sectors in their quest to accelerate economic growth and development.

Section: Resultssupporting

confidence: 93%

The nexus between tourism, financial development, and economic growth: Evidence from African countries

African Development Review

2021

Self Cite

“…A well-developed and functioning financial system can efficiently facilitate resource mobilization and capital accumulation, which improve productivity and promote economic growth (Levine and Zervos, 1998; Ehigiamusoe and Lean, 2019a, 2020). Fundamentally, Levine (2005) posits that financial development occurs when financial markets and intermediaries eliminate or reduce the effects of information, transaction, and enforcement costs and effectively provide major functions of the financial system.…”

Section: Introductionmentioning

confidence: 99%

Revisiting the role of inflation in financial development: unveiling non-linear and moderating effects

Narayanan

Poon

2021

APJBA

Self Cite

PurposeThis paper aims to examine the non-linear impact of inflation on financial development, and the moderating role of GDP in the relationship between inflation and financial development in a panel of 125 countries.Design/methodology/approachIt employs the dynamic common correlated effects (CCE) that can control for heterogeneity and cross-sectional dependence. This technique enables us to conduct both panel and country-specific analyses.FindingsThough there is no significant evidence that inflation has a non-linear impact on financial development in the panel, the country-specific estimations reveal that inflation has a non-linear impact on financial development in 66 countries. The results also show that GDP mitigates the detrimental effect of inflation on financial development in 45 countries. An insight into the non-linear relationship between inflation and financial development is crucial for policy decision-making. Besides, knowledge of the moderating role of GDP in the relationship between financial development and inflation is fundamental for policy formulations.Originality/valueAlthough the extant literature has shown that the inflation rate plays a negative role in financial development, the literature overlooked the non-linear relationship between the two variables. Besides, the studies have not considered the role of GDP in moderating the impact of the inflation rate on financial development. This study fills these gaps in the existing body of finance literature.

“…Specifically, a low level of financial development may not enhance economic growth (e.g. Kouki, 2013; Ehigiamusoe & Lean, 2019; Ehigiamusoe & Samsurijan, 2020; Walle, 2014), while “too much finance” may undermine economic growth (e.g. Law et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

Rethinking the impact of GDP on financial development: Evidence from heterogeneous panels

African Development Review

Guptan²,

Narayanan

2021

Self Cite

This paper examines the nonlinear impact of real GDP per capita on financial development in a panel of 125 countries. It also determines the moderating effect of inflation on the impact of GDP on financial development. It employs the dynamic panel system generalized method of moments (GMM) and the dynamic common correlated effects (CCE) to do both panel and countryspecific analysis, as well as control for cross-sectional dependence, heterogeneity and endogeneity. This study shows that GDP has a positive impact on financial development in the entire panel. However, when we split the panel into different income groups, we find a positive impact in the high-and middle-income groups while the impact is insignificant in the low income group. Although we find no evidence of a nonlinear impact of GDP on financial development in the panel, the country-specific analysis reveals a significant nonlinear relationship between GDP and financial development in 73 countries. We also show that inflation adversely moderates the positive impact of GDP on financial development in middle-income countries. This study implies that the relationship between GDP and financial development depends on the levels of GDP and inflation rate. We recommend some policy options based on the findings.