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Does financial structure matter for economic growth: evidence from South Africa

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  • Kore Marc Guei

    (Nelson Mandela University)

Abstract

Policy makers have argued about the role of financial structure on economic growth. The bank-based, the market-based, and the financial services view are the three competing views of financial structure. Stock market development and the banking sector are regarded as avenues through which growth can be supported by providing liquidity for firm financing. Hence establishing the contribution of the financial structure on economic performance in South Africa is of crucial importance to policy makers and government officials. The study utilizes the autoregressive distributed lag model for econometric estimation. The data set covers the period 1975-2016. The results do not indicate a clear relationship between financial structure and economic growth in South Africa. The findings do not support the view that government should place an emphasis on improving one financial system (market-based system) as opposed to another (bank-based system). The contribution to the existing literature is that the results do not support the bank-based or the market-based system. A possible extension of the study will be to investigate the impact of the financial structure using household sectors (ratios of deposits, insurance, pensions, shares and other securities to GDP) on economic growth.

Suggested Citation

  • Kore Marc Guei, 2019. "Does financial structure matter for economic growth: evidence from South Africa," Economics Bulletin, AccessEcon, vol. 39(3), pages 1941-1957.
    • Handle: RePEc:ebl:ecbull:eb-19-00302
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    Cited by:

    1. Glenn Jenkins & Shahrzad Safaeimanesh, 2021. "Estimation of the Potential Economic Welfare Gains to SACU from Trade Facilitation," Working Paper 1462, Economics Department, Queen's University.

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    More about this item

    Keywords

    Economic growth; Financial structure; Autoregressive distributed lag model.;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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