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The Impact of Financial Development on Investment in Botswana: an ARDL-Bounds Testing Approach

Author

Listed:
  • MUYAMBIRI, Brian

    (Department of Economics, University of South Africa, Pretoria, South Africa)

  • ODHIAMBO, Nicholas M.

    (Department of Economics, University of South Africa, Pretoria, South Africa)

Abstract

This paper examines the impact of both bank-based and market-based financial development on investment in Botswana during the period 1976 – 2014, using the autoregressive distributed lag (ARDL) bounds testing approach. The study adopts a flexible accelerator model, which enhances the relationship between financial development and investment. In order to capture the breadth and depth of the financial sector in the study country, the study makes use of bank- and market-based financial development indices. These are constructed from an array of bank- and market-based financial development indicators. The empirical results of this study show that while bank-based financial development has both a long-run and short-run positive impact on investment in Botswana, market-based financial development has no significant impact on investment, either in the short run or in the long run. L’impatto dello sviluppo finanziario sugli investimenti in Botswana: un approccio ARDL-Bound Testing Oggetto di questo studio è esaminare l’impatto dello sviluppo finanziario sia bank-based che market-based in Botswana nel periodo 1976-2014, tramite l’utilizzo dei test ad approccio ARDL. Viene adottato un modello ad acceleratore flessibile che potenzia la relazione tra sviluppo finanziario ed investimenti. Al fine di cogliere le dimensioni del settore finanziario nello studio del paese, il lavoro utilizza indici di sviluppo finanziario bank-based e market-based, derivanti da una gamma di indicatori di questo tipo. Evidenze empiriche mostrano che mentre lo sviluppo bank-based in Botswana ha un impatto positivo sia nel lungo che nel breve periodo, quello market-based non ha alcun impatto significativo sugli investimenti, sia nel lungo che nel breve periodo.

Suggested Citation

  • MUYAMBIRI, Brian & ODHIAMBO, Nicholas M., 2017. "The Impact of Financial Development on Investment in Botswana: an ARDL-Bounds Testing Approach," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 70(2), pages 193-216.
    • Handle: RePEc:ris:ecoint:0800
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    References listed on IDEAS

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    Cited by:

    1. Brian Muyambiri & Nicholas M. Odhiambo, 2018. "The Impact Of Financial Development On Investment: A Review Of International Literature," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 9(2).
    2. Lira P. Sekantsi & Sayed Timuno, 2017. "Electricity Consumption In Botswana: The Role Of Financial Development, Industrialisation And Urbanization," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 19, pages 75-102, June.

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    More about this item

    Keywords

    Botswana; Investment; Bank-Based Financial Development; Market-Based Financial Development; Flexible Accelerator Model;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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