Finance–growth nexus in sub-Saharan Africa revisited: evidence based on a new composite index.

What is it about?

In this paper, we use a panel dataset of 33 countries to revisit the finance–economic growth nexus in sub-Saharan Africa for the period 1990–2015. Unlike previous studies, we proxy finance with a composite index of financial development which accounts for the multidimensionality of financial development. Also, we consider real sector growth in our empirical analyses. We establish long-run relationships between finance and (real sector and economic) growth. We provide evidence to show that finance and (real sector and economic) growth cause each other.

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Why is it important?

Overall, the findings suggest that the finance (real sector and economic)–growth nexus is sensitive to the choice of econometric methodology