Financial Sector Development and Economic Growth Nexus: Empirical Evidence from Sierra Leone

Mohamed Ibrahim Justice Ganawah, Alusine Borbson Koroma
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Abstract

The study examines the nexus between financial sector development and economic growth in Sierra Leone over the period 1980-2018. The stationarity test result shows that the order of integration of variables included in the model was a mixture of I (0) and I (1). Therefore, the study employs the bounds testing approach to Cointegration and error correction models developed within the Autoregressive Distributed Lag (ARDL) framework to explore the long-and short-run effects of financial sector development on economic growth. The study uses two different measures of financial development including, credit to the private sector and broad money. The study also investigates whether there are other determinants of economic growth. Evidence of short-run dynamics was found amongst the various financial development indicators and economic growth. The results showed that credit to the private sector and broad money influenced economic growth in the short-run. Again, inflation and government consumption expenditure were found to impede economic growth in the short-run. Contrarily, Gross capital formation and FDI were found to stimulate economic growth in the short-run. The study recommends that policy makers should take caution in the choice of financial development indicator as a policy instrument for the attainment of growth and development. Again on the basis of empirical evidence, policies to improve the accessibility of affordable credit by the private sector, including small and medium scale enterprises should be enforced
金融部门发展与经济增长关系:来自塞拉利昂的经验证据
该研究考察了1980年至2018年期间塞拉利昂金融部门发展与经济增长之间的关系。平稳性检验结果表明,模型中包含的变量的积分顺序是I(0)和I(1)的混合。因此,本研究采用自回归分布滞后(ARDL)框架下的协整和误差修正模型的边界检验方法,探讨金融部门发展对经济增长的长期和短期影响。该研究使用了两种不同的金融发展指标,包括私营部门信贷和广义货币。该研究还调查了经济增长是否存在其他决定因素。在各种金融发展指标和经济增长之间发现了短期动态的证据。结果表明,对私营部门和广义货币的信贷在短期内影响了经济增长。通货膨胀和政府消费支出在短期内阻碍了经济增长。相反,发现资本形成总额和外国直接投资在短期内刺激经济增长。该研究建议决策者在选择金融发展指标作为实现增长和发展的政策工具时应谨慎。同样,根据经验证据,应执行改善私营部门,包括中小型企业获得负担得起的信贷的政策
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