Do Banking Sector Reforms Cause Economic Growth?: Empirical Evidence from Africa's Largest Economy

Do Banking Sector Reforms Cause Economic Growth?: Empirical Evidence from Africa's Largest Economy

Author by Dr. Andy Okwu

Journal/Publisher: Corporate Ownership & Control

Volume/Edition: 13

Language: English

Pages: 553 - 564

Abstract

This paper employed times series analysis data on relevant empirical diagnostics to examine banking sector growth-led nexus within the context of Africa’s largest economy, Nigeria. Diagnostics established stationarity of banking sector indicators and control variables at first difference. Findings showed no causal relationship between banking sector reforms and economic growth in the short-run and that, though liberalisation in particular did not Granger-cause growth of the economy during the study period, banking sector reforms caused growth of the real sector of the Nigerian economy. Hence, the caveat was that long-run growth effects of banking sector reforms on real sector of economies are functions of policy targets of such banking or financial sectors reform strategies. Consequently, articulation of banking and financial sectors reforms within long-run rather than short-run perspectives and complementarity of liberalisation were recommended.


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