Financial sector development and economic growth nexus in South Africa

Tafirenyika Sunde

International Journal of Monetary Economics and Finance, 2012, vol. 5, issue 1, 64-75

Abstract: The study investigated the nexus between financial sector development and economic growth in South Africa using cointegration and error correction modelling and; the Granger causality tests. The results of the study show that economic growth is explained by the financial sector variables and control variables such as inflation, exchange rate, and real interest rates. The Granger causality test results show that there is generally a bidirectional relationship between economic growth and financial sector development which implies that if the economy grows the financial services sector also grows and vice versa.

Keywords: financial development; economic growth; financial sector development; monetary economics; finance; unit root tests; cointegration; error correction modelling; Granger causality; bidirectional; South Africa. (search for similar items in EconPapers)
Date: 2012
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