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Structural Breaks and Finance-Driven Growth Hypothesis in ECOWAS: Further Empirical Evidence

Author

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  • Olusegun A. Omisakin

    (Department of Economics & Business Studies, Redeemer's University, Nigeria; and Centre for Econometrics and Allied Research (CEAR), University of Ibadan, Ibadan, Nigeria)

  • Oluwatosin A. Adeniyi

    (Department of Economics, University of Ibadan, Ibadan, Nigeria)

Abstract

This study makes a cross sectional case in investigating the validity, or otherwise, of the finance-driven growth hypothesis in the ECOWAS countries using annual data from 1970 to 2008 for seven countries namely: Burkina Faso, Cote d’Ivoire, The Gambia, Ghana, Nigeria, Senegal and Togo. In contrast to earlier studies on developing countries, this study specifically tests for the possibility of structural breaks/regime shifts in the finance-growth long run relationship by employing the Gregory and Hansen (1996) residual based test which accounts for endogenous structural break. While the Gregory-Hansen structural break cointegration result confirms the existence of cointegration relationships among the selected countries despite the breakpoints, the Granger-causality test result indicates a general pattern of causality running from financial development to economic growth in most of the countries. Also, the striking feature of the result of our estimated growth model generally lends credent to the importance of financial development in explaining growth dynamics among the selected countries, thus reinforcing the finance-driven growth hypothesis.

Suggested Citation

  • Olusegun A. Omisakin & Oluwatosin A. Adeniyi, 2014. "Structural Breaks and Finance-Driven Growth Hypothesis in ECOWAS: Further Empirical Evidence," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 7(3), pages 63-80, December.
    • Handle: RePEc:tei:journl:v:7:y:2014:i:3:p:63-80
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    References listed on IDEAS

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    Cited by:

    1. Amar Anwar & Ichiro Iwasaki, 2023. "The finance–growth nexus in the Middle East and Africa: A comparative meta‐analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4655-4683, October.
    2. Ismail O. Fasanya & Ismail A. Olayemi, 2020. "Modelling financial openness growth-nexus in Nigeria: evidence from bounds testing to cointegration approach," Future Business Journal, Springer, vol. 6(1), pages 1-11, December.
    3. IWASAKI, Ichiro & ONO, Shigeki, 2023. "Economic Development and the Finance-Growth Nexus : A Meta-Analytic Approach," CEI Working Paper Series 2023-06, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.

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    More about this item

    Keywords

    Financial development; Economic growth; Structural break; Cointegration;
    All these keywords.

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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