Is Financial Development a Factor to the Leading Growth Profile of the South African Economy? Measuring and Uncovering the Hidden Secret

Abdulrashid Rafindadi () and Zarinah Yusof
Additional contact information
Zarinah Yusof: Faculty of Economics and Administration, Department of Economics, University of Malaya

International Journal of Economics and Empirical Research (IJEER), 2013, vol. 1, issue 9, 99-112

Abstract: This paper investigates the factors contributing to the formidable growth rate of the South African economy. Specifically, we determine whether the leading role of the South African economy in the Sub- Saharan African region is a result of its sophisticated and resilient financial sector development. If not, the paper tries to identify the possible explanations for the country’s economic growth profile in recent times. From a series of empirical findings, the paper assesses the factor(s) that could impede the overall growth profile of the country’s economy in both the long-run and the short-run. To do this, we measure the shortrun and long-run impacts of financial development on economic growth of the South African economy, and we also investigate whether the relationship between financial development and economic growth is monotonic or not. The study employs time series data from 1980 to 2011 and uses the ARDL bounds-testing approach to cointegration and the U test of Mehlum and Sasbuchi. The study reveals that trade openness and the ratio of credit issued to the private sector by banks to GDP have fuelled South Africa’s economic growth in both the long-run and the short-run. Similarly, the U test also discovered that the relationship between financial development and GDP growth in the country is non-monotonic. Surprisingly, M3 has a short-run negative influence on GDP while the greatest and most crucial long-run factor that has impeded the accumulated growth profile of the South African economy is the low productive contribution of the country’s population to GDP. This study explores new insights for policy makers in South Africa.

Keywords: Financial development; ARDL bounds test; economic growth (search for similar items in EconPapers)
JEL-codes: C01 F43 G1 (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://tesdo.org/shared/upload/pdf/papers/IJEER,%201_9_,%2099-112.pdf (application/pdf)
http://tesdo.org/journal_detail.php?paper_id=47&expand_year=2013 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijr:journl:v:1:y:2013:i:9:p:99-112

Access Statistics for this article

International Journal of Economics and Empirical Research (IJEER) is currently edited by Dr. Muhammad Shahbaz (PhD Applied Economics)

More articles in International Journal of Economics and Empirical Research (IJEER) from The Economics and Social Development Organization (TESDO) Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Muhammad Shahbaz (PhD Applied Economics) ( this e-mail address is bad, please contact ).