Impact of Financial Development on Inclusive Growth in Nigeria
Keywords:
Economic Growth; Financial Development; Inclusive Growth; NigeriaAbstract
This study examined the impact of financial development on inclusive growth in Nigeria using a time series data obtained from secondary sources between 1999 and 2019. Financial development was measured using broad money supply and domestic credit to private sector, while inclusive growth was measured from income perspective using per capita GDP and from expenditure perspective using household consumption expenditure.
The data were mainly obtained from World Development Indicators database. The data were analysed using Autoregressive Distributed Lag (ARDL) Bound test approach. The results of the ARDL revealed that financial development proxy with broad money supply exert significant positive impact on per capita income and household consumption expenditure in both short and long run. On the contrary, domestic credit to private sector has significant negative impact on per capita income in short and long run while the impact on household consumption expenditure was not significant in both short and long run. The study concluded that financial development represented by broad money supply is crucial to inclusive growth in Nigeria.
The research therefore recommends that the government should use Broad Money Supply as one of the financial development instruments to promote inclusive growth in Nigeria.
References
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Adusei, M. (2013).Finance-growth nexus in Africa: a panel generalized method of moments (GMM) analysis. Asian Economic and Financial Review, 3 (10), 1314-1324.
Asteriou, D., & Hall, S. G. (2007). Applied econometrics: A modern approach. New York: Palgrave Macmillan.
Ayinde, T. O., & Yinusa, O. G. (2016). Financial development and inclusive growth in Nigeria: A threshold Analysis. AUDCE, 12(4), 326-346.
Beck, T., Maimbo, S. M., Faye, I., & Triki, T. (2011). Financing Africa: Through the crisis and beyond. Washington, DC: World Bank.
Bittencourt, M. (2012). Financial development and economic growth in Latin America: Is Schumpeter right? Journal of Policy Modeling, 34(3), 341–355.
Bruck, T., & Kebede, S. W. (2013).Dynamics and drivers of consumption and multidimensional poverty: Evidence from Rural Ethiopia. DIW Discussion papers No: 1287, Deutsches Institut fur Wirtschaftsforschung (DIW), Berlin.
Buffie, E. (1984). Financial repression, the new structuralists, and stabilization policy in semi industrialized Economies. Journal of Development Economics, 14 (3), 305-322
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Das, P. K., & Guha-Khasnobis, B. (2008). Finance and growth an empirical assessment of the Indian economy, in Guha-Khasnobis,B. & Mavrotas, G. (Eds), Financial Development, institutions, growth and Poverty Reduction, Palgrave Macmillan, New York, NY, pp. 120 -140.
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Diamond, D.W. (1984). Financial intermediation and delegated monitoring. The Review of Economic Studies, 51 (3), 393-414.
Goldsmith, R. (1969). Financial structure and development. New Haven: Yale University Press.
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Guru, B. K., & Yadav, I. S. (2019). Financial development and economic growth: panel evidence from BRICS. Journal of Economics, Finance and Administrative Science, 24(47), 113 -126. doi:10.1108/JEFAS-12-2017-0125
Iheanacho, E. (2016).The impact of financial development on economic growth in Nigeria: An ARDL Analysis. Economies, 4(26), 1-12.
Imran, K., & Khalil, S. (2012). Contribution of financial development in poverty reduction through industrial growth. International Journal of Asian Social Science, 2, 567-576.
King, R. G. & Levine, R. (1993).Finance and growth: Schumpeter might be right. The Quarterly Journal of Economics, 108 (3), 717-737.
Law, S. H., & Singh, N. (2014). Does too much finance harm economic growth? Journal of Banking and Finance, 41, 36-44.
Leitao, N. C. (2010).Financial development and economic growth: a panel data approach”, Theoretical and Applied Economics, 10(551), 15-24.
Lucas, R.E. (1988).On the mechanics of economic development. Journal of Monetary Economics, 22 (1), 3-42.
McKinnon, R. I. (1973). Money and capital in economic development. Washington D.C: The Bookings Institution Press.
Menyah, K., Nazlioglu, S., & Wolde-Rufael, Y. (2014).Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach. Economic Modelling, 37, 386–394.
NBS (2021). National Bureau of Statistics.
Ntow-Gyamfi, M., Bokpin, G., Aboagye, A., & Ackah, C. G. (2019). Financial development, institutional quality and inclusive growth in Africa. Global Business Review, 1-24. doi:DOI: 10.1177/0972150919875367
Pesaran, M. H, Shin Y., & Smith R. J. (2001). Bounds testing approach to the analysis of level relationships. Journal of Applied Econometrics, 16, 289-326.
Robinson, J. (1952). The generalization of the general theory: The rate of interest and other essays. London: Macmillan.
Saci, K., Giorgioni, G., & Holden, K. (2009). Does financial development affect growth? Applied Economics, 41 (13), 1701-1707.
Schumpeter, J.A. (1934). A Theory of Economic Development: An Inquiry into Profits, capital, credit, interest, and the Business Cycle. Cambridge: Harvard University Press.
Shan, J. (2005). Does financial development ‘lead’ economic growth? A vector autoregression Appraisal. Applied Economics, 37 (12), 1353-1367.
Shaw, E. S. (1973). Financial deepening in economic development. New York: Oxford University Press.
Stiglitz, J. E., & Weiss, A. (1983). Incentive effects of terminations: applications to the credit and labor Markets. The American Economic Review, 73(5), 912-927.
Uddi, G., Shahbaz, M., Arouri, M., & Teulon, F. (2014). Financial development and poverty reduction nexus: A co-integration and causality analysis in Bangladesh. Economic Modelling, 36, 405-412.
Wolde-Rufael, Y. (2009).Re-examining the financial development and economic growth nexus in Kenya. Economic Modelling, 26(6), 1140-1146.
Adusei, M. (2013).Finance-growth nexus in Africa: a panel generalized method of moments (GMM) analysis. Asian Economic and Financial Review, 3 (10), 1314-1324.
Asteriou, D., & Hall, S. G. (2007). Applied econometrics: A modern approach. New York: Palgrave Macmillan.
Ayinde, T. O., & Yinusa, O. G. (2016). Financial development and inclusive growth in Nigeria: A threshold Analysis. AUDCE, 12(4), 326-346.
Beck, T., Maimbo, S. M., Faye, I., & Triki, T. (2011). Financing Africa: Through the crisis and beyond. Washington, DC: World Bank.
Bittencourt, M. (2012). Financial development and economic growth in Latin America: Is Schumpeter right? Journal of Policy Modeling, 34(3), 341–355.
Bruck, T., & Kebede, S. W. (2013).Dynamics and drivers of consumption and multidimensional poverty: Evidence from Rural Ethiopia. DIW Discussion papers No: 1287, Deutsches Institut fur Wirtschaftsforschung (DIW), Berlin.
Buffie, E. (1984). Financial repression, the new structuralists, and stabilization policy in semi industrialized Economies. Journal of Development Economics, 14 (3), 305-322
Cecchetti, S. G., & Kharroubi, E. Reassessing the impact of finance on growth (BIS Working Paper No. 381). Basel, Switzerland: Bank for International Settlements.
Das, P. K., & Guha-Khasnobis, B. (2008). Finance and growth an empirical assessment of the Indian economy, in Guha-Khasnobis,B. & Mavrotas, G. (Eds), Financial Development, institutions, growth and Poverty Reduction, Palgrave Macmillan, New York, NY, pp. 120 -140.
Dhrifi, A. (2013).Financial development and poverty: What role for growth and Inequality. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3,119-129.
Diamond, D.W. (1984). Financial intermediation and delegated monitoring. The Review of Economic Studies, 51 (3), 393-414.
Goldsmith, R. (1969). Financial structure and development. New Haven: Yale University Press.
Greenwald, B., & Stiglitz, J. E. (2013). Learning and industrial policy: Implications for Africa. In J. E. Stiglitz, J. L. Yifu, & E. Patel (Eds.), The industrial policy revolution II (pp. 25–49). London, UK: Palgrave Macmillan.
Guha-Khasnobis, B., & Mavrotas, G. (2008). Financial development, institutions, growth and poverty reduction. New York, NY: Palgrave Macmillan,
Guru, B. K., & Yadav, I. S. (2019). Financial development and economic growth: panel evidence from BRICS. Journal of Economics, Finance and Administrative Science, 24(47), 113 -126. doi:10.1108/JEFAS-12-2017-0125
Iheanacho, E. (2016).The impact of financial development on economic growth in Nigeria: An ARDL Analysis. Economies, 4(26), 1-12.
Imran, K., & Khalil, S. (2012). Contribution of financial development in poverty reduction through industrial growth. International Journal of Asian Social Science, 2, 567-576.
King, R. G. & Levine, R. (1993).Finance and growth: Schumpeter might be right. The Quarterly Journal of Economics, 108 (3), 717-737.
Law, S. H., & Singh, N. (2014). Does too much finance harm economic growth? Journal of Banking and Finance, 41, 36-44.
Leitao, N. C. (2010).Financial development and economic growth: a panel data approach”, Theoretical and Applied Economics, 10(551), 15-24.
Lucas, R.E. (1988).On the mechanics of economic development. Journal of Monetary Economics, 22 (1), 3-42.
McKinnon, R. I. (1973). Money and capital in economic development. Washington D.C: The Bookings Institution Press.
Menyah, K., Nazlioglu, S., & Wolde-Rufael, Y. (2014).Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach. Economic Modelling, 37, 386–394.
NBS (2021). National Bureau of Statistics.
Ntow-Gyamfi, M., Bokpin, G., Aboagye, A., & Ackah, C. G. (2019). Financial development, institutional quality and inclusive growth in Africa. Global Business Review, 1-24. doi:DOI: 10.1177/0972150919875367
Pesaran, M. H, Shin Y., & Smith R. J. (2001). Bounds testing approach to the analysis of level relationships. Journal of Applied Econometrics, 16, 289-326.
Robinson, J. (1952). The generalization of the general theory: The rate of interest and other essays. London: Macmillan.
Saci, K., Giorgioni, G., & Holden, K. (2009). Does financial development affect growth? Applied Economics, 41 (13), 1701-1707.
Schumpeter, J.A. (1934). A Theory of Economic Development: An Inquiry into Profits, capital, credit, interest, and the Business Cycle. Cambridge: Harvard University Press.
Shan, J. (2005). Does financial development ‘lead’ economic growth? A vector autoregression Appraisal. Applied Economics, 37 (12), 1353-1367.
Shaw, E. S. (1973). Financial deepening in economic development. New York: Oxford University Press.
Stiglitz, J. E., & Weiss, A. (1983). Incentive effects of terminations: applications to the credit and labor Markets. The American Economic Review, 73(5), 912-927.
Uddi, G., Shahbaz, M., Arouri, M., & Teulon, F. (2014). Financial development and poverty reduction nexus: A co-integration and causality analysis in Bangladesh. Economic Modelling, 36, 405-412.
Wolde-Rufael, Y. (2009).Re-examining the financial development and economic growth nexus in Kenya. Economic Modelling, 26(6), 1140-1146.
Published
2021-11-17
How to Cite
Kazeem, B. (2021). Impact of Financial Development on Inclusive Growth in Nigeria: Array. The Journal of Accounting and Management, 11(3). Retrieved from https://dj.univ-danubius.ro/index.php/JAM/article/view/1340
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