Financial development, taxation and economic growth in sub-sahara africa

Paul Ekpeyong and David Adewoyin

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigates the correlation between tax policies, financial development, and economic growth in Sub-Saharan Africa. The research sample comprises 12 countries from West Africa, Southern Africa, and East Africa, spanning the years 2000 to 2019. The selected countries include Nigeria, Senegal, Mali, Benin, Burkina Faso, Cameroon, Cape Verde, Ghana, South Africa, Namibia, Lesotho, Kenya, and Tanzania. To analyze the data, the study utilizes the pooled mean group (PMG) or mean group auto-regressive distributed lag (MG-ARDL) estimation method. The findings indicate that private sector credit to GDP and foreign direct investment significantly drive economic growth, while the variables of liquidity, inflation, population, and taxes do not exert a significant impact on economic growth. Moreover, the effectiveness of these policies varies across countries, suggesting that some nations benefit more from tax policies, while others benefit more from financial development. It should be noted that the variations in economic structures and institutional frameworks among the countries in the panel data may influence the relationship between the variables. Based on the study's results, policymakers should prioritize a set of policies to promote economic growth in Sub-Saharan Africa. These policies include measures to enhance financial development, improve taxation policies, foster public investment, address macroeconomic imbalances, strengthen institutional quality, and promote regional integration. The effective implementation and ongoing monitoring of these policies are crucial for achieving the desired impact and sustainable development in the region.

Keywords: Tax policy; financial development; Economic growth; Sub Saharan Africa; pooled mean; ARDL. (search for similar items in EconPapers)
JEL-codes: H2 H21 H24 O4 O47 (search for similar items in EconPapers)
Date: 2023-06-20
New Economics Papers: this item is included in nep-afr and nep-fdg
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