Title: Does bank-based financial development spur economic growth? Empirical evidence from the Democratic Republic of Congo

Authors: Nicholas M. Odhiambo; Sheilla Nyasha

Addresses: Department of Economics, University of South Africa, P.O. Box 392, UNISA, 0003, Pretoria, South Africa ' Department of Economics, University of South Africa, P.O. Box 392, UNISA, 0003, Pretoria, South Africa

Abstract: In this study, we examined the dynamic causality between financial development and economic growth in the Democratic Republic of the Congo (DRC), using time-series data from 1965 to 2015. Unlike some previous studies, the current study used three proxies to examine this linkage. In addition, the study used savings and inflation as intermittent variables, thereby creating a multivariate Granger-causality model, and limiting the omission-of-variable bias. Using the ARDL bounds testing approach, the study found that there is a short-run causal relationship between financial development and economic growth in the DRC, but the direction of causality is dependent on the proxy used to measure the level of financial development. The study recommends that policy efforts in the DRC should be directed at developing both the financial and the real sectors in the short run as both sectors have been found to be mutually beneficial to each other, in this study.

Keywords: financial development; economic growth; granger-causality test; Democratic Republic of Congo; DRC.

DOI: 10.1504/IJSE.2019.103493

International Journal of Sustainable Economy, 2019 Vol.11 No.4, pp.378 - 393

Received: 13 May 2019
Accepted: 04 Jul 2019
Published online: 06 Nov 2019 *

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