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Financial development and economic growth in SADC countries: A panel study

Clement Moyo () and Pierre Le Roux ()
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Pierre Le Roux: Department of Economics, Nelson Mandela University

No 1834, Working Papers from Department of Economics, Nelson Mandela University

Abstract: The impact of financial development on economic growth has received considerable attention since the 2008/2009 global financial crisis. High levels of credit to the private sector were partly to blame for the crisis and this has re-ignited the debate on whether the growth enhancing effects of financial development outweigh the retarding effects associated with financial crises. This paper therefore, examines the financial development-growth nexus in SADC countries during the period 1990-2015. Financial development indices are created due to the strong correlations between the individual financial development indicators using principal component analysis. The empirical analysis is conducted using the Pooled Mean Group estimator and the results show that financial development has a negative impact on economic growth. Due to financial vulnerabilities emanating from an inadequate monitoring and supervisory framework, further enhancement of financial development should be undertaken with caution in SADC countries.

Keywords: Financial development; economic growth; PMG; ARDL and PCA. (search for similar items in EconPapers)
JEL-codes: C13 C22 G20 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2018-11, Revised 2018-11
New Economics Papers: this item is included in nep-fdg
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http://repec.mandela.ac.za/RePEc/mnd/wpaper/paper.1834.pdf First version, 2018 (application/pdf)

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