Savings and Financial Sector Development: Panel Cointegration Evidence from Africa

Roger Kelly and George Mavrotas ()
Additional contact information
Roger Kelly: Institute for Development Policy and Management, University of Manchester
George Mavrotas: School of Economic Studies, University of Manchester, Postal: School of Economic Studies, University of Manchester, Manchester M13 9PL, U.K.

No A4-2, 10th International Conference on Panel Data, Berlin, July 5-6, 2002 from International Conferences on Panel Data

Abstract: The present paper uses panel integration and cointegration tests for a dynamic heterogeneous panel of 17 African countries to examine the impact of financial sector development on private savings. We used three different measures of financial sector development to capture the variety of channels through which financial structure can affect the domestic economy. The empirical results obtained vary considerably among countries in the panel, thus highlighting the importance of using different measures of financial sector development rather than a single indicator. The evidence is rather inconclusive, although in most of the countries in the sample a positive relationship between financial sector development and private savings seems to hold. The empirical analysis also suggests that a change in government savings is offset by an opposite change in private savings in most of the countries in the panel, thus confirming the Ricardian equivalence hypothesis. Liquidity constraints do not seem to play a vital role in most of the African countries in the group, since the relevant coefficient is negative and significant in only a small group of countries.

Keywords: Financial Sector Development; Private Savings; Panel Cointegration Tests; Africa (search for similar items in EconPapers)
JEL-codes: E21 E44 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-ets, nep-fin and nep-mfd
Date: Written 2002-06
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