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Financial Structure and Economic Development in Africa

Nyasha Mahonye and Kalu Ojah
Authors registered in the RePEc Author Service: Kalu Ojah () and Nyasha Mahonye

No 482, Working Papers from Economic Research Southern Africa

Abstract: This paper explores the relationship between economic development and financial structure: that is, whether the degree of financial system structure matter for pace and character of economic development in 15 African countries for the period of 1995 to 2011. The paper utilizes the fixed effect instrument variable technique for econometric estimation. None of the financial structure indicators enters any of the economic development regressions significantly at the conventional 10% level, which is inconsistent with bank-based and market-based system view of financial system. Therefore, financial structure does not matter for economic development in these African countries. Rather, financial services are a significant determinant of economic development for our sample of 15 African countries. The overarching policy implication therefore is that relevant authorities should invest in accumulating both quantity and quality financial services in order to impact economic development in Africa.

Keywords: 15 African countries; financial structure; fixed effect instrument variable technique and economic development (search for similar items in EconPapers)
JEL-codes: G15 O11 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2014
New Economics Papers: this item is included in nep-afr
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