Financial development and Economic growth in the Democratic Republic of the Congo : Supply leading or Demand following?

PINSHI, Christian P. and KABEYA, Anselme M. (2020): Financial development and Economic growth in the Democratic Republic of the Congo : Supply leading or Demand following?

Abstract

The purpose of this paper is to verify the direction of the relationship between financial development and economic growth in the Democratic Republic of the Congo (DRC). Using Granger's causality framework, the results indicate that there is a robust, one-way relationship ranging from economic growth to financial development. This result validates Demand following hypothesis in the DRC. Consequently, policies aimed at supporting economic growth, such as the accumulation of endogenous factors (knowledge, education, research), macroeconomic stabilization, reconstruction of infrastructure, structural reforms, creation of a good economic environment for the private and regulatory sectors, and good governance are very important for improving financial development in the DRC.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic growth, financial development, Democratic Republic of the Congo
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O38 - Government Policy; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O44 - Environment and Growth

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