FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH: THE EXPERIENCE OF 10 SUB-SAHARAN AFRICAN COUNTRIES REVISITED

The paper examines the long run and causal relationship between financial developmentand economic growth for ten countries in sub-Saharan Africa. Using the vectorerror correction model (VECM), the study finds that financial development is cointegratedwith economic growth in the selected ten countries in sub-Saharan Africa. That is there isa long run relationship between financial development and economic growth in the selectedsub-Saharan African countries. The results show that financial development Granger causeseconomic growth in Central African Republic, Congo Republic, Gabon, and Nigeria whileeconomic growth Granger causes financial development in Zambia. However, bidirectionalrelationship between financial development and economic growth was found in Kenya, Chad,South Africa, Sierra Leone and Swaziland. The results show the need to develop the financialsector through appropriate regulatory and macroeconomic policies. However, in Zambiaemphasis needs to be placed on economic growth to propel financial development.