The nexus between financial development and economic growth in the SADC region: Empirical evidence using ARDL-PMG estimation techniques

Ngonidzashe Chiranga

doi:10.15637/jlecon.2588

Authors

Ngonidzashe Chiranga Tshwane University of Technology / South Africa 0000-0001-8150-0282

10.15637/jlecon.2588

Abstract

This study aims to provide empirical insights into the financial development and economic growth nexus in the SADC region by examining how much financial development translates to economic growth in the short or long run. Also, the examination of economic growth is impacted more by external or internal factors. Also, causality testing economic growth on financial development. The study applies the panel Autoregressive Distributive method (ARDL-PMG) on a panel data set of 11 SADC countries in the period 1998-2021. The study finds a negative and significant relationship between economic growth and financial development at a 1% level of significance in the long run whereas in the short run, the relationship is negative but not significant. Furthermore, the study findings suggest that economic growth in the SADC region is more influenced by external factors than internal factors as signified by the significant negative long-run influence of external debt and the significant positive influence of trade openness. On the other hand, financial development has a neutral impact on economic growth. The study recommends that SADC countries should embrace outward-looking policies as an avenue to learn new ideas from the world.

Keywords:

ARDL Economic Growth Financial Development SADC

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