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Financial Development, Institutions and Economic Growth: Evidence from Sub-Saharan Africa

Effiong, Ekpeno (2015): Financial Development, Institutions and Economic Growth: Evidence from Sub-Saharan Africa.

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Abstract

The paper investigates the effect of financial development on economic growth conditional on the level of institutional quality for a panel of 21 Sub-Saharan African countries for the period 1986-2010. A standard growth regression is estimated with linear interaction between financial development and institutional quality. Our findings indicate that financial development has not significantly contributed to SSA economic growth, contrary to the significant positive effect of institutional quality. The interaction effect of both financial and institutional development is positive but insignificant. This evidence suggest the existing institutions has not enhanced the finance-growth relationship in the region. Therefore, improving institutions relevant to the financial sector is desired.

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