This paper analyzes the links between financial and trade openness and financial development in Sub-Saharan African (SSA) countries. It is based on a panel dataset using methods that tackle slope heterogeneity, cross-sectional dependence and non-stationarity, important econometric problems that are often ignored in the literature. The results do not point to a general direct robust link between trade and capital account openness and financial development in SSA, once we control for other factors such as GDP per capita and inflation. But there is some indication that trade openness is more important for financial development in countries with better institutional quality. The findings might be due to a number of factors including distortions in domestic financial markets, relatively weak institutions and/or poor financial sector supervision. Thus, African policy makers should be cautious about expectations regarding immediate gains for financial development from greater international integration. Such gains are more likely to occur through indirect channels.

This paper examines the empirical relationship between long–run growth and the degree of financial development, proxied by the ratio of bank credit to the private sector as a fraction of GDP. We find that this proxy enters significantly and with a positive sign in growth regressions on a large cross–country sample, but with a negative sign using panel data for Latin America. Our findings suggest that the main channel of transmission from financial development to growth is the efficiency of investment, rather than its volume. We also present a model where the negative correlation between financial intermediation and growth results from financial liberalization in a poor regulatory environment.

This study assesses dynamics of openness and finance in Africa by integrating financial development dynamics of depth, activity and size in the assessment of how financial, trade, institutional, political and other openness policies (of second generation structural and institutional reforms) have affected financial development. The empirical evidence is based on Generalized Method of Moments with data from 28 African countries for the period 1996-2010. The following findings are established:(i) While the de jure (KAOPEN) indicator of financial openness improves financial depth, the de facto (FDI) measurement decreases it, with the effect of the latter measure positive on financial size. (ii) Whereas trade openness improves financial depth, its effect on financial activity and size is negative. (iii) Institutional openness has a positive effect on financial dynamics of depth and activity, while its effect on financial size is negative. (iv) Political openness and economic freedom are detrimental to financial depth and activity. Justifications for these nexuses are discussed.

The paper investigates empirically the determinants of economic growth for a large sample of sub-Saharan African countries during 1981-92. The results indicate that (i) an increase in private investment has a relatively large positive impact on per capita growth; (ii) growth is stimulated by public policies that lower the budget deficit in relation to GDP (without reducing government investment), reduce the rate of inflation, maintain external competitiveness, promote structural reforms, encourage human capital development, and slow population growth; and (iii) convergence of per capita income occurs after controlling for human capital development and public policies.

This study examines the tripartite relationship between financial development, trade openness and economic growth in Ghana, Nigeria and South Africa for the 1980-2014 period. The study reveals a long-run causal relationship between financial development, trade openness and economic growth, thereby supporting finance- and trade-led growth hypotheses for Ghana, Nigeria and South Africa. Moreover, long-run causality from financial development and economic growth to trade openness is found for Ghana. In the short-run, there is evidence of causality from growth to financial development for Ghana, from trade openness to financial development for Nigeria and from growth and financial development to trade openness for South Africa. The findings of this study are robust to alternative proxies of financial development and various diagnostic tests. The study shows that financial development and trade openness can be deployed to accelerate growth, while growth and financial development can be used to promote trade openness. Additionally, trade openness spurs financial development. Therefore, a tripartite relationship exists between the three variables. Hence, interdependence between financial development, trade openness and economic growth is found and consequent policy recommendations are made.

This article investigates how financial development helps to reduce poverty directly through the McKinnon conduit effect and indirectly through economic growth. The results obtained with data for a sample of developing countries from 1966 through 2000 suggest that the poor benefit from the ability of the banking system to facilitate transactions and provide savings opportunities but to some extent fail to reap the benefit from greater availability of credit. Moreover, financial development is accompanied by financial instability, which is detrimental to the poor. Nevertheless, the benefits of financial development for the poor outweigh the cost.