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Scrutinizing the complex relationship between Financial Development Gross Fixed Capital Formation and Economic Growth in Africa by adopting CCEMG and AMG estimation techniques Yusheng Kong, Easmond Baah Nketia, Stephen Kwadwo Antwi & Mohammed Musah

Scrutinizing the complex relationship between Financial Development Gross Fixed Capital Formation and Economic Growth in Africa by adopting CCEMG and AMG estimation techniques

Author (s)

Yusheng Kong, Easmond Baah Nketia, Stephen Kwadwo Antwi & Mohammed Musah

Abstract

­This paper explores the relationship between gross fixed capital formation, financial development, and economic growth in Africa. The study used 39 African countries from 1997 to 2017. The study adopted five financial development indicators. The study employed Augmented Mean Group and Common Correlated Effects Mean Group estimation techniques for the estimations. From the study, Bank Deposit to GDP is statistically significant, it has a negative effect on economic growth, and it shows dual causality, Bank Deposit is inadequate in Africa but significant to economic growth. Broad Money to GDP, Domestic Credit to GDP, and Credit to Private Sector to GDP are all statistically insignificant to growth. They also have negative influence on economic growth. Broad Money shows dual causality with growth while both Domestic Credit, and Credit to Private Sector displays one way causality from economic growth. Gross Domestic Savings to GDP is statistically insignificant and it has a positive bearing on growth, it has one-way causality from growth. Broad Money is very limited in Africa to the extent that, the funds available for domestic transactions are barely enough to have any impact on economic growth. Domestic banks and financial institutions hardly gives credit to private sector and government institutions, due to high risk factor. Gross fixed capital formation has a positive bearing on economic growth. It displays bi-directional causality with economic growth. Financial development does not have a blanket relationship with economic growth, but rather it depends on the type of financial development indicator being used.

 Keywords: Financial Development, Gross Fixed Capital Formation, Economic Growth, Africa, Relationship.

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Title: Scrutinizing the complex relationship between Financial Development Gross Fixed Capital Formation and Economic Growth in Africa by adopting CCEMG and AMG estimation techniques
Author: Yusheng Kong, Easmond Baah Nketia, Stephen Kwadwo Antwi & Mohammed Musah
Journal Name: International Journal of Science and Business
Website: ijsab.com
ISSN: ISSN 2520-4750 (Online), ISSN 2521-3040 (Print)
DOI: https://doi.org/10.5281/zenodo.4282943
Media: Online
Volume: 4
Issue: 11
Acceptance Date: 17/11/2020
Date of Publication: 21/11/2020
PDF URL: https://ijsab.com/wp-content/uploads/620.pdf
Free download: Available
Page: 160-174
First Page: 160
Last Page: 174
Paper Type: Research article
Current Status: Published

 

Cite This Article:

Yusheng Kong, Easmond Baah Nketia, Stephen Kwadwo Antwi & Mohammed Musah (2020). Scrutinizing the complex relationship between Financial Development Gross Fixed Capital Formation and Economic Growth in Africa by adopting CCEMG and AMG estimation techniques. International Journal of Science and Business, 4(11), 160-174. doi: https://doi.org/ 10.5281/zenodo.4282943

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About Author (s)

Yusheng Kong, PhD,  School of Finance and Economics, Jiangsu University, 301 Xuefu Road, Zhenjiang, Jiangsu Province, PR China. 212013.

Easmond Baah Nketia (corresponding author), School of Finance and Economics, Jiangsu University, 301 Xuefu Road, Zhenjiang, Jiangsu Province, PR China. 212013. Email: ebnketia@gmail.com

Stephen Kwadwo Antwi, School of Finance and Economics, Jiangsu University, 301 Xuefu Road, Zhenjiang, Jiangsu Province, PR China. 212013.

Mohammed Musah, School of Finance and Economics, Jiangsu University, 301 Xuefu Road, Zhenjiang, Jiangsu Province, PR China. 212013.

 

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DOI: https://doi.org/10.5281/zenodo.4282943