Financial Development and Economic Growth in Sub-Saharan Africa: A Dynamic Panel Data Analysis

Abstract

Financial Development is the accumulation of financial assets at a rate that is more rapid than the rate of non-financial assets accumulation. Economic growth is the evolution of gross domestic product (GDP) in the short, medium and long terms. We have attempted in this paper to analyze and to verify empirically the controversy on the relationship between the financial sphere and the real sphere. From the data observed on 21 Sub-Saharan African (SSA) countries and by using the dynamic panel GMM technique, we were able to show that there exists a positive link between financial development and economic growth. This link is intense for the issue of the financial system in the space of Sub-Saharan Africa. However, an outcome highlighting an eventual link between foreign direct investment and economic growth is opportune.

 

Keywords: Real sphere – Financial sphere – Dynamic panel GMM – Sub-Saharan Africa.