Financial development, bank savings mobilization and economic performance in Ghana: evidence from a multivariate structural VAR

Adenutsi, Deodat E. (2010): Financial development, bank savings mobilization and economic performance in Ghana: evidence from a multivariate structural VAR. Published in: International Journal of Development Research and Quantitative Techniques , Vol. 1, No. 2 (2011): pp. 3-24.

Abstract

This paper examines the implications of financial development for commercial bank savings mobilisation and economic performance in Ghana since the pursuit of financial reforms programme in September 1987. To achieve this objective a Structural Vector Autoregressive (SVAR) model on quarterly time series data spanning from 1987(3) to 2009(4) was employed. The methodological approach of the analysis hinged on the verification of the theoretical stance that financial development promotes improved financial intermediation, efficient resource mobilisation and allocation for higher economic performance. The empirical results suggest that, in Ghana, financial development has enhanced the performance of commercial banks by way of savings mobilisation but adversely impacted on long-run economic performance directly. Thus, financial development can only enhance long-run economic performance indirectly through increased savings mobilised by banks. The success of Ghana’s financial reform programme is largely contingent on the depth of the financial market, which should be considered as the starting point in the sequencing of policy implementation. It is concluded that prudent and rigorous policy measures that will further enhance financial deepening are critically required and this should be seen by policymakers in Ghana as the necessary condition for resource mobilisation and long-run economic performance.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial Development; Bank Savings Mobilisation; Economic Performance; SVAR Model
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; 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 > O4 - Economic Growth and Aggregate Productivity

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