Impact of Financial Liberalization on Economic Growth: A Case Study of South Africa

Abstract

Financial liberalization plays a major role in stimulating economic growth. In light of this, the paper examines the impact of financial liberalization on macroeconomic performance in South Africa by using time series econometric analysis over the time period . The study uses GDP, the dependent variable as a measure of economic growth and the following macroeconomic variables: inflation, lending rate exchange rate and financial deepening (M2/GDP) as financial liberalization indices. To confirm the order of integration, the Augmented Dickey-Fuller and Phillips Perron unit root tests are employed. The study uses the Johansen co-integration and the Error Correction Mechanism to obtain long run and short run coefficients.Findings of the study are that inflation, lending rate and financial deepening have positive influence on economic growth whilst exchange rate has a negative impact on economic growth. This study recommends that the government should put in place measures that stimulate investments with fair lending rates so as to deepen the financial system which in turn promotes economic growth.

Financial inclusion and poverty reduction in Nigeria: the role of information and communication technology (ICT)

“…In other words, this view asserts that financial development largely benefits the wealthy. This view is consistent with the intensive margin theory that only wealthy individuals from financial development (see Chipote et al. , 2014).…”

“…The theory notes that if vulnerable groups are financial included—in this case poor people—they will have access to useful financial services that they can use to improve their welfare and rise above poverty (see Ozili, 2020). In the same way, the intensive margin theory notes that financial access can influence inequality and poverty both directly and indirectly through ICT (see Chipote et al. , 2014).…”

“…The theory notes that if vulnerable groups are financial included-in this case poor people-they will have access to useful financial services that they can use to improve their welfare and rise above poverty (see Ozili, 2020). In the same way, the intensive margin theory notes that financial access can influence inequality and poverty both directly and indirectly through ICT (see Chipote et al, 2014). For example, in developing economies, where administrative bottlenecks, weak institutional frameworks and structural inadequacies inhibit financial development, ICT can help to reduce information costs, deepen financial inclusion, narrow the income gap and end poverty [1].…”

The African Continental Free Trade Area and Financial Development for Women Economic Participation in Africa

“…According to the intensive margin theory, inclusive development opportunities can be enhanced when more financial services are provided to existing clients already using financial institutions. This position which is consistent with Chipote et al (2014) is relevant to the context of this study because the AfCFTA can provide opportunities that motivate existing bank customers to benefit more from bank services, especially if corresponding operations for which the funds are needed are associated with opportunities from the AfCFTA. Conversely, the extensive margin theory is the position that, when the financial services are extended beyond the remit of existing bank customers (i.e., to include the fraction of the population that was previously unbanked), opportunities for inclusive development also become apparent.…”

Microfinance Institutions and Female Entrepreneurship in Sub-Saharan Africa: Avoidable Female Unemployment Thresholds

“…According to the intensive margin theory, inclusive development, such as the encouragement of women to engage in business activities, can be apparent when financial institutions, such as MFIs provide existing customers of the attendant financial institutions with more opportunities for financial access, such that they benefit from more financial avenues by which to explore opportunities in doing of business (Chipote et al, 2014). It follows that when existing female customers of MFIs are provided with enhanced financial access opportunities, the theoretical framework reflected in such a process is the intensive margin theory.…”