This paper explores the relationship between economic development and …nancial structure: that is, whether the degree of …nancial system structure matter for pace and character of economic development in 15 African countries for the... more
This paper explores the relationship between economic development and …nancial structure: that is, whether the degree of …nancial system structure matter for pace and character of economic development in 15 African countries for the period of 1995 to 2011. The paper utilizes the …xed e¤ect instrument variable technique for econometric estimation. None of the …nancial structure indicators enters any of the economic development regressions signi…cantly at the conventional 10% level, which is inconsistent with bank-based and market-based system view of …nancial system. Therefore, …nancial structure does not matter for economic development in these African countries. Rather, …nancial services are a signi…cant determinant of economic development for our sample of 15 African countries. The overarching policy implication therefore is that relevant authorities should invest in accumulating both quantity and quality …nancial services in order to impact economic development in Africa.
