IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/52349.html
   My bibliography  Save this paper

Does Financial Liberalization, Spur Economic Growth and Poverty Reduction in Six Sub-Saharan African Countries; Panel Unit Root and Panel Vector Error Correction Tests

Author

Listed:
  • Dandume, Muhammad Yusuf
  • A.C., Dr.Malarvizhi

Abstract

This paper examines the linkage among financial liberalization, economic growth and poverty reduction in Sub-Saharan African countries (SSA). The study applies the recent panel Co-integration and vector error correction mechanism to address the heterogeneity and cross-border interdependence over the period of 1980 to 2010. The results reveal that economic growth is positively associated with poverty reduction and financial liberalization coefficients are positively related to economic growth. It implies that financial liberalization causes economic growth. However, the coefficients of financial liberalization are not significant in the poverty equation suggests that financial liberalization does not have direct impact on poverty reduction in the six Sub-Saharan African countries. This implies that the financial liberalization effects of poverty are upon contingent on the distributional changes introduced by the growth and the configuration of institutions and policies that supported the liberalization process and particularly, the existence or otherwise of good governance.

Suggested Citation

  • Dandume, Muhammad Yusuf & A.C., Dr.Malarvizhi, 2014. "Does Financial Liberalization, Spur Economic Growth and Poverty Reduction in Six Sub-Saharan African Countries; Panel Unit Root and Panel Vector Error Correction Tests," MPRA Paper 52349, University Library of Munich, Germany, revised Aug 2013.
    • Handle: RePEc:pra:mprapa:52349
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/52349/1/MPRA_paper_52349.pdf
    File Function: original version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/52419/1/MPRA_paper_52419.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Thorsten Beck & Ross Levine, 2008. "Legal Institutions and Financial Development," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 11, pages 251-278, Springer.
    2. R McKinnon, 1991. "Financial Control in the Transition to a Market Economy," CEP Discussion Papers dp0040, Centre for Economic Performance, LSE.
    3. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(3), pages 597-625, June.
    4. Sylviane Guillaumont Jeanneney & Kangni Kpodar, 2011. "Financial Development and Poverty Reduction: Can There be a Benefit without a Cost?," Journal of Development Studies, Taylor & Francis Journals, vol. 47(1), pages 143-163.
    5. Bonfiglioli, Alessandra, 2008. "Financial integration, productivity and capital accumulation," Journal of International Economics, Elsevier, vol. 76(2), pages 337-355, December.
    6. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    7. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 717-737.
    8. Sylviane Guillaumont Jeanneney & Kangni Kpodar, 2011. "Financial Development and Poverty Reduction: Can There Be a Benefit Without a Cost?," Post-Print halshs-00601306, HAL.
    9. Philip Arestis & Howard Stein, 2005. "An Institutional Perspective to Finance and Development as an Alternative to Financial Liberalisation," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(4), pages 381-398.
    10. Fry, Maxwell J, 1997. "In Favour of Financial Liberalisation," Economic Journal, Royal Economic Society, vol. 107(442), pages 754-770, May.
    11. Valerie R. Bencivenga & Bruce D. Smith, 1991. "Financial Intermediation and Endogenous Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 195-209.
    12. McKinnon, Ronald I, 1989. "Financial Liberalization and Economic Development: A Reassessment of Interest-Rate Policies in Asia and Latin America," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 5(4), pages 29-54, Winter.
    13. Stiglitz, Joseph E., 2000. "Capital Market Liberalization, Economic Growth, and Instability," World Development, Elsevier, vol. 28(6), pages 1075-1086, June.
    14. Enowbi Batuo, Michael & Mlambo, Kupukile, 2012. "Financial liberalisation, Banking Crises and Economic Growth in African Countries," MPRA Paper 41524, University Library of Munich, Germany.
    15. Ronald I. McKinnon, 1991. "Financial Control in the Transition from Classical Socialism to a Market Economy," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 107-122, Fall.
    16. Sylviane Guillaumont Jeanneney & Kangni Kpodar, 2011. "Financial Development and Poverty Reduction: Can There be a Benefit without a Cost?," Post-Print halshs-00554229, HAL.
    17. Babajide Fowowe, 2013. "Do fiscal incentives promote investment?: empirical evidence from Nigeria," Journal of Developing Areas, Tennessee State University, College of Business, vol. 47(2), pages 17-35, July-Dece.
    18. Soyibo, Adedoyin, 1994. "Characteristics of the savings-investment process in Nigeria," World Development, Elsevier, vol. 22(8), pages 1199-1210, August.
    19. Patrick Honohan, 2004. "Financial development, growth, and poverty: how close are the links?," Policy Research Working Paper Series 3203, The World Bank.
    20. Philip Arestis & Panicos Demetriades, 1999. "Financial Liberalization: The Experience of Developing Countries," Eastern Economic Journal, Eastern Economic Association, vol. 25(4), pages 441-457, Fall.
    21. Babajide Fowowe, 2008. "Financial Liberalization Policies and Economic Growth: Panel Data Evidence from Sub‐Saharan Africa," African Development Review, African Development Bank, vol. 20(3), pages 549-574.
    22. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Boukhatem, Jamel, 2016. "Assessing the direct effect of financial development on poverty reduction in a panel of low- and middle-income countries," Research in International Business and Finance, Elsevier, vol. 37(C), pages 214-230.
    2. Madhu Sehrawat & A. Giri, 2016. "Financial development, poverty and rural-urban income inequality: evidence from South Asian countries," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(2), pages 577-590, March.
    3. US Thathsarani & Jianguo Wei & GRSRC Samaraweera, 2021. "Financial Inclusion’s Role in Economic Growth and Human Capital in South Asia: An Econometric Approach," Sustainability, MDPI, vol. 13(8), pages 1-18, April.
    4. Gehringer, Agnieszka, 2013. "Financial liberalization, financial development and productivity growth: An overview," Economics Discussion Papers 2013-46, Kiel Institute for the World Economy (IfW Kiel).
    5. Raja Almarzoqi & Sami Ben Naceur & Akshay Kotak, 2015. "What Matters for Financial Development and Stability?," IMF Working Papers 2015/173, International Monetary Fund.
    6. Ijaz Uddin & Muhammad Azam Khan, 2024. "Global Evidence on the Impact of Globalization, Governance, and Financial Development on Economic Growth," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 14546-14577, September.
    7. Yongfu Huang, 2011. "Private investment and financial development in a globalized world," Empirical Economics, Springer, vol. 41(1), pages 43-56, August.
    8. Alessandra Cepparulo & Juan Carlos Cuestas & Maurizio Intartaglia, 2017. "Financial development, institutions, and poverty alleviation: an empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 49(36), pages 3611-3622, August.
    9. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    10. Salifou Ouedraogo & Hamidou Sawadogo, 2022. "Financial development, financial structure and economic growth in the Sub‐Saharan African countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3139-3162, July.
    11. Sylviane Guillaumont Jeanneney and Ping Hua, 2020. "When and How African Real Exchange Rates Relative to China Affect its Manufacturing?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 45(4), pages 1-34, December.
    12. Edoardo Gaffeo & Petya Garalova, 2014. "On the finance-growth nexus: additional evidence from Central and Eastern Europe countries," Economic Change and Restructuring, Springer, vol. 47(2), pages 89-115, May.
    13. Abdelhafidh Dhrifi, 2013. "Financial Development and Poverty: What Role for Growth and Inequality?," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(4), pages 119-129, October.
    14. Yabibal M. Walle, 2014. "Revisiting the Finance–Growth Nexus in Sub‐Saharan Africa: Results from Error Correction‐based Panel Cointegration Tests," African Development Review, African Development Bank, vol. 26(2), pages 310-321, June.
    15. Pradhan, Rudra P. & Arvin, Mak B. & Bahmani, Sahar & Hall, John H. & Norman, Neville R., 2017. "Finance and growth: Evidence from the ARF countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 66(C), pages 136-148.
    16. Madhu Sehrawat & A. K. Giri, 2018. "The impact of financial development, economic growth, income inequality on poverty: evidence from India," Empirical Economics, Springer, vol. 55(4), pages 1585-1602, December.
    17. Jakob Haan & Regina Pleninger & Jan-Egbert Sturm, 2022. "Does Financial Development Reduce the Poverty Gap?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 161(1), pages 1-27, May.
    18. Appiah, Michael & Frowne, Doreen Idan & Tetteh, Derrick, 2020. "Re-examining the Nexus Between Financial Development and Poverty Reduction: Evidence from Emerging Economies," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 27(2).
    19. Shantanu Ghosh & Tarak Nath Sahu, 2021. "Financial inclusion and economic status of the states of India: An empirical evidence," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 50(2), July.
    20. Sylviane Guillaumont Jeanneney & Ping Hua, 2020. "When and how African real exchange rates relative to China affect its manufacturing?," Post-Print hal-03060589, HAL.

    More about this item

    Keywords

    Liberalization; poverty; economic growth; financial repression;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:52349. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.