The Effects of Financial Sector Development on Economic Growth: Evidence from Low and Middle-Income African Countries (2000-2017)

• Author(s): Purity Namasaka ; Tom Makumbi ; James Wakodala
• Paper ID: 1705080
• Page: 388-397
• Published Date: 02-10-2023
• Published In: Iconic Research And Engineering Journals
• Publisher: IRE Journals
• e-ISSN: 2456-8880
• Volume/Issue: Volume 7 Issue 3 September-2023

Abstract

This research study aimed to examine the effects of financial sector development on economic growth in low and middle-income African countries during the period from 2000 to 2017. The study employed a comprehensive empirical analysis to investigate the relationship between financial sector development indicators and various measures of economic growth. The research utilized a panel dataset comprising data from multiple African countries, considering a range of financial sector development indicators such as the size of the banking sector, stock market development, and access to financial services. Economic growth was measured using indicators such as GDP growth rate, investment rate, and capital accumulation. The findings of the study, based on econometric analyses and robust statistical techniques, revealed a positive and significant relationship between financial sector development and economic growth in the African context. Specifically, it was observed that an increase in financial sector development indicators, such as the size of the banking sector and stock market development, contributed to higher levels of economic growth in the studied countries. Furthermore, the research demonstrated that financial sector development had a significant impact on investment and capital accumulation. A well-developed financial sector facilitated greater access to finance, which stimulated investment activities and led to increased capital formation. This, in turn, contributed to sustained economic growth in the African countries under examination. The study also highlighted the role of financial inclusion in promoting economic growth. Improved access to financial services, including banking and credit facilities, resulted in increased financial participation and entrepreneurship, fostering economic development.

Citations

IRE Journals:
Purity Namasaka , Tom Makumbi , James Wakodala "The Effects of Financial Sector Development on Economic Growth: Evidence from Low and Middle-Income African Countries (2000-2017)" Iconic Research And Engineering Journals Volume 7 Issue 3 2023 Page 388-397

IEEE:
Purity Namasaka , Tom Makumbi , James Wakodala "The Effects of Financial Sector Development on Economic Growth: Evidence from Low and Middle-Income African Countries (2000-2017)" Iconic Research And Engineering Journals, 7(3)