A Study On The Relations Between Financial Development And Economic Growth In SADC

The banking sectors of Southern African Development Community(SADC)countries have experienced significant growth in recent years.The key contributing factors have been increased economic activity and improved regulatory oversight.However,the rapid rise of Pan-African banks has also been a contributing factor.The growing presence of major Pan-African and global banks on the continent has undoubtedly improved the availability and quality of financial services in recent years.That said,large banks from well-developed financial markets on the African continent have made the biggest impact.As a result,financial sectors across the SADC region stand to benefit from gains in efficiency,innovation and financial deepening.Existing literature studies show that financial development is an important factor in economic growth.At the key period of reformation on financial system and the optimization of economic structure,whether the relation between SADC countries'financial development and economic increase is compliable?If yes,what is the relation?And how the relation works?This thesis will give the elementary answers for the above questions by analyzing the relations between African financial development and economic growth.This thesis constructs proper variables of financial development and economic growth,and researches mainly the relationships of economic growth with financial deepening,financial efficiency and financial penetration respectively.This analysis technique constructs VAR model and firstly make cointegrated relationship test,and estimate the parameters of variables based on the model of vector error,then makes long-term and short-term Grander causal analysis on variables of financial development and economic increase.This research work is organized in five chapters.Chapter one provides a general introduction to the study.Chapter two presents a literature review.Chapter three explains the conduction mechanism and the current state of African banks in financial development and economic growth.Chapter four is the empirical research,used Augment Dickey-Fuller test,Johannsen cointegration test and Granger causality test.Chapter six provides conclusions,policy recommendations.The conclusions are as follows:(1)Financial deepening,as indicate of broad money to GDP,has bi-directional causality in short-run,however in lags 3-4 as long-run there has no causality or merely influence.It indicates that African's economic monetization in the short and medium term to promote economic growth,and long-term effect is very weak.(2)Financial efficiency as indicate of the private sector credit to GDP.GDP is the Granger Cause of the amount domestic credit to private sector by bank in short-run,and in the long-run the ratio of domestic credit to private sector by bank is the Granger Cause of GDP.It indicates that in short term the increased financial efficiency promotes the economic growth,and in the long term the economic growth increase the financial efficiency.This is in line with the actual situation in SADC countries,financial efficiency is the reason for economic growth is due to financial efficiency,provides a considerable number of funds to support the normal operation of the economy,which to a certain extent,promote economic growth.(3)financial penetration,as indicate of the total banking sector asset in percent of GDP,it has bi-directional causality between the total banking sector asset,used to proximate banking penetration,and GDP.Corresponding suggestions are given at the last part of this thesis.First,to maintain the balance between the physical sectors of the African real sector and the financial sector the expansion of the scale of financial assets should be based on high quality and high efficiency.Second,to further improve and improve the efficiency of the African financial intermediary savings-investment transformation mechanism to further enhance the bank's operational efficiency and allocation efficiency.Third,we must use the market and legal means to take full use of various forms to digest and dispose of nonperforming assets and reduce the proportion of non-performing assets.Last,to strengthen financial innovation,financial industry cannot be separated from financial innovation.