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The impact of financial sector development on economic growth: analysis of the financial development gap between Cameroon and South Africa

Mandiefe, Piabuo Serge (2015): The impact of financial sector development on economic growth: analysis of the financial development gap between Cameroon and South Africa.

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Abstract

African countries are developing better economic and monetary reforms so as to gain the status of an emergent country over a certain period of time, Cameroon is not left behind, she wants to be emergent by 2035. This study seeks to verify the short-run and long-run impact of financial sector development on economic growth and also to verify the gap of financial development that separates Cameroon and an emergent country like South Africa. The vector error correction model was used, in Cameroon a long-run relationship between economic growth and financial development was noticed while for South Africa there is a short-run relationship between bank deposits and economic growth, there is also a long-run relationship between economic growth and financial development. The South African economy moves towards its long-run equilibrium faster after economic shocks thanks to its good financial developed economy. We also notice that there is a gap of 0.26, this means that for the economy of Cameroon to be emergent, the speed of long-run adjustment should increase by 0.26.

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