Research On The Impact Of Financial Development And Economic Growth On Poverty Alleviation ——Evidence From Africa

The African Union 2030,2063,and beyond strategies focused on transformative economic growth,regional integration,empowering the populace,and consolidating peace and society cannot be achieved without considering the synergies of financial development,economic growth,and poverty alleviation in elevating these policies.NGOs,the World Bank,the IMF,and many others have devised various strategies to address this global scourge,resulting in abundant empirical studies on the short or medium-term interactions between financial development and macroeconomic indicators.In recent years,many kinds of literature discuss the importance of financial development and economic growth to Africa's development,debating over the nature of the relationship,such as non-linearity and asymmetries.Others assert the relevance of financial products in affecting poverty alleviation significantly and the impact of economic growth on poverty alleviation.However,this study looks into how these primary variables,financial development and its'determinants and economic growth and its'determinants,alleviate poverty in the African continent.Based on the preliminary analysis,the research objectives use the hypothesis and the dataset,using appropriate estimation techniques and econometric processes.Each purpose used a correct estimated technique to check the relationship and predicted results.The study focuses on researching the impact of financial development and economic growth on poverty alleviation in Africa.According to the literature review,the impact of financial development and economic growth on poverty is based on a broad neoclassical growth model investigating endogenous setup.In today's real economy,the study uses quantitative techniques that follow others so that distinguished financial development and economic growth are progressing to reduce poverty.The research investigated 33 regional countries across the South,North,East,West,and Central Africa from 1985 to 2018 using various econometric methods.Poverty can be alleviated in Africa.The study reviewed the factors and strategies that affect poverty reduction in Africa and investigated the following:(1)To explore the connectivity of the theory of credit rationing in the financial sector,which is uneven.This objective unveils the nexus between financial development,economic growth and poverty reduction in Africa.It further checks on whether there is linkage with the variables chosen.(2)To emphasize the importance of economic growth and its impact on poverty.The analysis of this objective supported the Solow growth theory and its impact on poverty reduction in Africa.(3)To check the influence of financial development and economic growth on poverty reduction using the income inequality triangle model.In mind,to approve the developmental strategy,education,household consumption,and mortality rate proxies for poverty help alleviate it when controlled by financial development and economic growth.The theories of credit rationing,the neoclassical theory,the theory of Solow growth,and the modernization theory was used to achieve their objective.In addition to this,the poverty-inequality triangle model was added.The credit rationing theory,which deals with critical financial development variables,was used to analyze and estimate the results of the studies.In addition,the Solow growth theory was used to check other vital variables that affect economic growth in these study areas.In contrast,the modernization theory based on the neoclassical theory helps to promote growth.The poverty-inequality model checked key variables affecting poverty in African studies.The connectivity of the above approaches and models are used to analyze the objectives.The study examines the concepts behind the key variables used,the relationship and theories behind the research and checks on sophisticated econometric models to fill the critical research gap.With Fully Modified Ordinary Least Square(FMOLS),Pool Mean Group(PMG),Generalized Methods of Moments(GMM),Feasible Generalized Least Square(FGLS),random effects,fixed effects,and other normality tests,the intended objectives are achieved.This thesis runs a series of diagnostic tests by checking the robustness and reliability of models.The appropriate methods used to check the nexus of financial development,economic growth,and poverty reduction were studied using the PMG method.This approach was suitable for checking the reliability of the Hausman test.The PMG model is neutral in growth theories,making it more dependent on a set of recent activities rather than some macroeconomic dynamics principles,which can distort if not accepted.Secondly,the test was not moved from the significant standard assumption from the heteroscedasticity problem.A unit root was tested to correct correlation problems among the variables;the first difference was conducted to make all the variables significant at 1%,5%and 10%.The study further uses the Pedroni Co-integration panel v-statistic test.A one-sided test result shows large positive values reject the null hypothesis of no co-integration,which resulted in six out of eleven within dimensions being significant.The FMOLS was used to check the relationship between the independent and dependent variables,while the Pairwise Granger causality predicted a long-run relationship between the FD and EG variables.Finally,to estimate how the variables predicted the results,the fixed-effect model checks the relationship of the variables while the FGLS and GMM were used as estimators.From a microeconomic and macroeconomic perspective,poverty can be reduced if the government and policy framers consider such estimated variables very well.From the first analysis,the research problem gap was filled with keen finance variables like broad money,gross capital formation,domestic credit,and net domestic credit were used.One hypothesis was clear:one came up with results using some econometric models.A preliminary analysis was conducted to check if the variables used were intact.A correlation analysis was conducted to see if the variables linked together and further checked using cross-sectional dependence,which cannot be rejected at 0.01%.The study contains the unit root analysis,which shows all variables were corrected at the 1^st difference of 1(1),not at the level of 1(0).Using Pedroni's co-integration test,the results predict the short and the long-run,with the PMG-Estimator showing a long-run relationship for all the variables using the error corrections model.The Hausman PMG sigma test was employed to check how robust the objective is with the MG confirming results to be more reliable to the PMG.In practice,this goal suggested some policy implications and supported government policies to alleviate economic hardship on financial institutions.The second analysis checks the effect of economic growth on poverty reduction by analyzing the results from descriptive of the work to estimate effect sizes,co-integration,fully modified ordinarily least squares(FMOLS),and Granger causality was used.The study investigates the relationship between these economic growth variables(population and gross domestic product)and how they affect poverty.The findings show that as the population grows,economic growth encourages certain aspects of poverty reduction,with employment being a key influence.Granger's result demonstrates the uniqueness of the variables with bi-directional relationships between gross domestic product and poverty,gross capital formation and broad money,population and broad money,and population and poverty in the long run.According to the study,these primary characteristics lessen poverty in Africa,although only to a minor extent.Gross domestic product and poverty,gross capital creation and broad money,population and broad money,and population and poverty do not cause each other in the long run,per Granger causality.DOLS was used to check the robustness to the FMOLS.In the third analysis,the study examines the influence of financial development and economic growth on poverty reduction.The survey for this objective used mortality rate,education,and household consumption as proxies for poverty reduction.The study used three different estimators:fixed effects,feasible generalized least squares,and generalized methods of moment's models estimating poverty.The findings indicate that gross domestic product per capita,inflation,and employment are used to reduce poverty at some levels.According to the countries surveyed,gross domestic product,employment,and inflation are related to household consumption,education,and mortality,contributing to poverty reduction.However,the test concluded that Generalized Methods Moments with the gross domestic product per capita,employment and inflation placed under it have no impact on household consumption to reduce poverty.The results show most variables significantly have positive effects on dependent variables.Therefore,the results of this study have important implications for the implementation of policies and thus help reduce poverty in the study areas.The novelty of the thesis provided consistent and robust predictions of the predicted results of distinctiveness in FD and EG on poverty reduction.(1)Firstly,the study concentrated on the connectivity of financial development,economic growth and poverty reduction.Due to this,in fulfilling the literature gaps on review strategies and factors of this study.When key variables such as gross domestic product,gross capital formation,household consumption price,and government expenditure are combined to predict optimistic results,the study examines their uniqueness.The thesis used the PMG approach and Hausman PMG,Sigma-more to check the robustness of the objective,which the MG confirmed.(2)The introduction of employment,mortality rate,household consumption,education,and population in this research assists non-governmental organizations in Africa whose most key objectives are to alleviate poverty.The study establishes the relationships between the variables and employs estimators like GMM and FGLS.From the gaps in the literature,most studies ignore these variables,which in these studies predicted positive results.(3)In addition,the use of broad money and gross capital formation helps the financial sector act as outliners to develop the economy to know their motive of assisting governments through proper records to reduce poverty.However,in small and medium enterprises,the financial sector faces many obstacles in Sub-Saharan Africa,hampered by a weak business environment characterized by red tape,complex entry regulations,corruption,etc.Good enterprise,access to finance,public sector services,and new market opportunities are hampered if they do not consider these variables,which help these studies achieve their goals,as ignored by previous studies regarding poverty reduction.The study area was limited based on other think tanks and policy framers from different parts of the world on African economies.The lessons on Africa could also apply to different parts of the African continent.There are changes in the approaches to research in Africa,and most developing countries mainly depend on governmental influence.Due to data inaccessibility,most countries were excluded from this study.With the advancement in statistical accuracy,the study was able to control the different variables as per the research study and literature.The research targets NGOs/governments,bankers,and businesses;this determines the interest rate on loans given to the needy in society based on the theory of credit rationing,which helps them create employment,thereby reducing poverty.This study's findings have important implications for policy implementation for government and non-governmental organizations.According to the survey,these primary elements reduce poverty in Africa's competition,but they are minor.This study's upshot was phenomenal since most variables help the researcher achieve the results.One cannot alleviate poverty without looking at the studied variables used in this contest,which will help policy framers of non-governmental organizations in Africa.This study offers clear policy implications that will benefit most African countries to promote their people's economy and well-being by reducing poverty.