Financial liberalisation and economic growth in sub-Saharan African countries : dilemmas and prospects

[摘要] ENGLISH ABSTRACT: This dissertation examines the dynamic effects of financial liberalisation on economicgrowth in three sub-Saharan African countries - Kenya, South Africa and Tanzania. Thestudy was motivated by the current debate on the efficacy of financial liberalisation onthe one hand and the painful experience some of these countries have had with theliberalisation of the financial sector on the other.Three critical questions are asked. Does financial liberalisation contribute positivelytowards increased economic growth through its influence on savings, financialdeepening, and investment efficiency? Is the mechanism through which financialliberalisation affects economic growth in the study countries based on the volume orefficiency of investment? Does financial development, which results from financialliberalisation, Granger cause economic growth?Cointegration and error-correction techniques are used to investigate empirically thedynamic link between financial liberalisation and economic growth. The error-correctionmechanism used is based on the Hendry and Ericson's (1991) general to specific model.In addition, the study uses a dynamic causality test based on the vector error correctionmodel to examine the existence and the direction of causality between financialdevelopment and economic growth in the study countries.The theoretical and empirical underpinning of financial liberalisation as well as thecontroversies, challenges, and paradoxes that have emerged in the literature since theonset of financial liberalisation in the 1970s are also explored. Finally, the experiencesof the study countries with financial liberalisation are reviewed in order to relate theseexperiences to the presumptions of the theoretical literature on the one hand, and to serveas a precursor to the econometric investigations on the other. Contrary to the results obtained from some previous studies, the results of this studyindicate a strong support for McKinnon's complementarity hypothesis in Kenya, SouthAfrica and Tanzania. The results apply irrespective of whether money demand andsavings functions are estimated in static cointegration regression or in the dynamicformulation (error-correction model). This implies that the more attractive financialassets are the greater the incentives to invest in the study countries.The findings of the study also provide abundant support for the positive impact offinancial liberalisation on financial deepening in the study countries. However, theimpact of financial liberalisation on investment efficiency is not the same in the threestudy countries. Although financial liberalisation seems to positively influenceinvestment efficiency in Kenya, it fails to influence in a robust manner the level ofinvestment efficiency in South Africa and Tanzania.The results on the long-run causality between financial development and economicgrowth indicate that the direction of causality is sensitive to the choice of measurementfor financial development. On balance, a demand-following response is found to bestronger in South Africa and Kenya, while a supply-leading response is found to bestronger in Tanzania.In conclusion, it is worth mentioning that, while the positive role of financialliberalisation on economic growth through its influence on savings, financial deepeningand investment efficiency is overwhelming, the clarity and strength of this beneficial rolediffers from country to country and over time.

[发布机构] Stellenbosch University