South African Journal of Economic and Management Sciences
On-line version ISSN 1015-8812
ACARAVCI, Songul Kakilli; OZTURK, Ilhan and ACARAVCI, Ali. Financial development and economic growth: Literature survey and empirical evidence from sub-Saharan African countries. S. Afr. j. econ. manag. sci. [online]. 2009, vol.12, n.1, pp. 11-27. ISSN 1015-8812.
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.
Keywords : Financial development; growth; panel causality; sub-Saharan Africa.