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

Abstract. The paper examines the long run and causal relationship between financial de-velopment and economic growth for ten countries in sub-Saharan Africa. Using the vector error correction model (VECM), the study finds that financial development is cointegrated with economic growth in the selected ten countries in sub-Saharan Africa. That is there is a long run relationship between financial development and economic growth in the selected sub-Saharan African countries. The results show that financial development Granger causes economic growth in Central African Republic, Congo Republic, Gabon, and Nigeria while economic growth Granger causes financial development in Zambia. However, bidirectional relationship 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 finan-cial sector through appropriate regulatory and macroeconomic policies. However, in Zambia emphasis needs to be placed on economic growth to propel financial development. 1