Title: Financial stability and economic growth: a cross-country study

Authors: Lordina P. Manu, Charles K.D. Adjasi, Joshua Abor, Simon K. Harvey

Addresses: Department of Finance, University of Ghana Business School, P.O. Box LG 78, Legon, Ghana. ' Department of Finance, University of Stellenbosch Business School, Cape Town, South Africa. ' Department of Finance, University of Ghana Business School, P.O. Box LG 78, Legon, Ghana. ' Department of Economics, College of Business Administration, University of Nebraska, Lincoln, NE 68588-0489, USA

Abstract: The study examines the relationship between financial stability and economic growth in Africa. Using a dynamic fixed-effect model, the results reveal that financial stability impacts positively on economic growth. Specifically, the results indicate that capital adequacy, liquidity and asset quality have significant effects on the GDP growth rate both in the long and the short run. It is recommended that the agencies concerned, mainly the central banks and the governments of African countries, should pursue policies that enhance the stability of their financial systems in order to spur economic growth in their respective countries.

Keywords: financial stability; economic growth; Africa; capital adequacy; liquidity; asset quality; GDP growth rate.

DOI: 10.1504/IJFSM.2011.041920

International Journal of Financial Services Management, 2011 Vol.5 No.2, pp.121 - 138

Published online: 15 Aug 2011 *

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