Title: Financial sector development and economic growth nexus in South Africa

Authors: Tafirenyika Sunde

Addresses: Department of Economics, School of Business Management, Polytechnic of Namibia, Private Bag 13388, Windhoek, Namibia; 13 Storch Street, Windhoek, Namibia

Abstract: The study investigated the nexus between financial sector development and economic growth in South Africa using cointegration and error correction modelling and; the Granger causality tests. The results of the study show that economic growth is explained by the financial sector variables and control variables such as inflation, exchange rate, and real interest rates. The Granger causality test results show that there is generally a bidirectional relationship between economic growth and financial sector development which implies that if the economy grows the financial services sector also grows and vice versa.

Keywords: financial development; economic growth; financial sector development; monetary economics; finance; unit root tests; cointegration; error correction modelling; Granger causality; bidirectional; South Africa.

DOI: 10.1504/IJMEF.2012.044467

International Journal of Monetary Economics and Finance, 2012 Vol.5 No.1, pp.64 - 75

Received: 04 Feb 2011
Accepted: 01 Apr 2011
Published online: 26 Dec 2011 *

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