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Does financial structure matter for economic growth: An evidence from South Africa

M A Guei

MPRA Paper from University Library of Munich, Germany

Abstract: Economists and policy makers have argued about the role of financial structure on economic development. The bank-based, the market-based, and the financial services view are the three competing views of financial structure. Stock market development and the banking sector are regarded as avenues through which growth can be supported by providing liquidity for firm financing. Hence establishing the contribution of the financial structure on economic performance in South Africa is of crucial importance to policy makers and government officials. The study utilizes the autoregressive distributed lag model for econometric estimation. The data set covers the period 1975-2016. The results indicate financial structure does not matter for economic growth in South Africa. The results are robust to several sensitivity tests. The findings support the view that government should place an emphasis on improving the quality of the financial system as opposed to developing a particular financial system. The contribution to the existing literature is that the results support the financial services theory. Thus, financial structure does not matter for economic development even for an emerging country like South Africa which is predominantly market based. The implication of the results is that there is the need to enhance the quality of financial services to create real economic growth in South Africa.

Keywords: Economic growth; Financial structure; Autoregressive distributed lag model. (search for similar items in EconPapers)
JEL-codes: G1 G10 G2 G23 (search for similar items in EconPapers)
Date: 2018-12-04
New Economics Papers: this item is included in nep-fdg
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Journal Article: Does financial structure matter for economic growth: evidence from South Africa (2019) Downloads
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