On the transmission mechanisms in the finance–growth nexus in Southern African countries: Does institution matter?

Clement Olaniyi

Economic Change and Restructuring, 2022, vol. 55, issue 1, No 5, 153-191

Abstract: Abstract Studies have continued to emerge on the transmission channels through which finance influences growth. It has been argued that more finance without efficient institutions may not yield more growth. Meanwhile, studies on sub-Saharan Africa are sparse. None of existing studies have examined the moderating effect of institutions on finance–growth nexus in Southern Africa despite the weak institutions in the sub-region. Deviating from extant studies, this study contributes to general discussion by taking care of cross-sectional dependence among countries within an economic bloc. Driscoll and Kraay’s nonparametric covariance matrix estimator is used to take care of cross-sectional dependence. The research outputs reveal that institutional quality complements and stimulates the growth benefits of financial development in Southern African countries. It is further established that institutional quality has to persistently be above the threshold of 6.08 on the ordinal scale of 10 point before institution can strongly stimulate and complement financial development to impact positively on growth. This study, therefore, recommends that there is an urgent need for Southern African countries to strengthen and improve the quality of institutions so as to maximize the growth benefits of financial development.

Keywords: Financial development; Institutional quality; Economic growth; GMM; Threshold; Southern Africa (search for similar items in EconPapers)
JEL-codes: D53 E02 E44 N27 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://link.springer.com/10.1007/s10644-020-09313-5 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:kap:ecopln:v:55:y:2022:i:1:d:10.1007_s10644-020-09313-5

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/10644/PS2

DOI: 10.1007/s10644-020-09313-5

Access Statistics for this article

Economic Change and Restructuring is currently edited by George Hondroyiannis

More articles in Economic Change and Restructuring from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().