Financial Development and Economic Growth in Africa |
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| Authors: | Tibebe A. Assefa André Varella Mollick |
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| Affiliation: | 1. Department of Accounting, Finance and Economics, Bowie State University College of Business and Graduate Studies, Bowie MD, USA;2. Department of Economics and Finance, Robert C. Vackar College of Business &3. Entrepreneurship, University of Texas Rio Grande Valley, USA |
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| Abstract: | We revisit in this paper the debate between financial development and economic growth. In contrast to previous studies examining banking related measures, we focus on the capital account and the depth of African stock markets. We examine 15 African countries from 1995 to 2010 and employ both static and dynamic panel data methods. While the former suggest weak results overall, portfolio flows and Foreign Direct Investment (FDI) have consistently positive effects on economic growth under endogenous stock market capitalization. These findings reinforce the view that African countries should open their equity markets to international investors and encourage FDI. |
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| Keywords: | Africa economic growth equity markets FDI financial openness |
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