Financial Market Development and Economic Growth in Sub-Saharan Africa

Abstract

The development of the financial markets is considered as a major avenue for propelling the growth of economies. The study assessed the contributory role of financial market development to the growth of Sub-Saharan African economies using the quantile regression approach. The study focused on fortyeight economies within the Sub-Saharan African region and employed data from 2002 to 2019. The study was based on the explanatory design and the quantitative approach while descriptive statistics, unit root analysis, correlation analysis, Generalized Method of Moments (GMM) estimator, and the quartile regression were used to analyse the financial market development and economic growth nexus. Using the Generalized Method of Moments (GMM) estimator to implicate the short-run and long-run nexus, the result revealed that financial market development and economic growth are positively related in both the short-run and long-run. Also, a bi-directional causality was found to exist between financial market development and economic growth in Sub-Saharan Africa. The quantile regression result showed that financial market development increases economic growth for the 5th to the 75th quantile growth distributions but for the 95th quantile distribution, financial market development reduces economic growth. The study recommended that governments of Sub-Sahara Africa economies should support the development of the financial sector through granting of more credit to the private sector to cushion the productivity and growth prospects