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Impact of Financial Integration on Ethiopian Economic Growth

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  • Abdulaziz A Hussen

Abstract

This paper analyzes theoretically the role of financial integration on economic growth and empirically examines the influence of financial integration on Ethiopian economic growth. Many researchers find different investigation results during their data analysis on the impact of financial integration on economic growth. The outcome of most researchers indicate that financial integration has a positive contribution to economic growth, while the result of quite a few numbers of researchers suggested that financial integration has a negative influence on economic growth. Similarly, few of them propose that the relationship between these two variables as bidirectional. Furthermore, literatures categorize the impact of financial sector on economic growth into four basic hypotheses. Which are supply leading, demand following, bidirectional, and independent hypothesis. These hypotheses suggest that financial integration has different role on economic growth and all of them are supported by several research results of various researchers. It is considered that the main reason behind these contrasting research results are the level of financial integration and the composition of financial flows. Moreover, the financial crises that occur in recent decades created a heated debate among researchers on the advantages and disadvantages of financial integration. However, most economists agree that financial integration is beneficial to the economy. The result of this paper analysis also shows, financial integration has a positive impact on the Ethiopian economic performance.

Suggested Citation

  • Abdulaziz A Hussen, 2020. "Impact of Financial Integration on Ethiopian Economic Growth," Business and Economic Research, Macrothink Institute, vol. 10(1), pages 55-76, March.
    • Handle: RePEc:mth:ber888:v:10:y:2020:i:1:p:55-76
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    References listed on IDEAS

    as
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    4. Kose, M. Ayhan & Prasad, Eswar S. & Terrones, Marco E., 2009. "Does financial globalization promote risk sharing?," Journal of Development Economics, Elsevier, vol. 89(2), pages 258-270, July.
    5. Eswar S. Prasad, 2011. "Role reversal in global finance," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 339-390.
    6. Philip Lane, 2013. "Financial Globalisation and the Crisis," Open Economies Review, Springer, vol. 24(3), pages 555-580, July.
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    More about this item

    Keywords

    Financial integration; Economic growth; Financial system; Financial market;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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