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JEL Classification:

C22, C23, F21, F31, O16


This study re-examines and contributes to the literature on the finance-growth linkage in sub-Saharan Africa. The findings, from applying various econometric methods, showed a moderate to high capital mobility over the period 1996-2014, measured by the Feldstein-Horioka investment-savings coefficient. The results identified that financial factors such as money supply and ‘private credit provided by the financial sector’ are positive drivers for long-run growth while the impact of bank-related factors and ‘foreign direct investment’ on growth were limited, showing a negative effect in the long-run. In the short-run, more linkages in finance-growth were identified especially in the middle-income Island-states. The results clearly show the existence of substantial cross-country heterogeneity and diversity in the policies and financial-economic conditions of the sample. The presence of bi-directional finance-growth causality indicates finance not only leads but also follows growth. The estimates imply that traditional investment bank-lending for accumulating physical capital (e.g. power infrastructure investment) and financing for a higher-value added-agro-industrialisation would promote growth potential.


Panel Estimation, Factor Analysis, Heterogeneity, Feldstein-Horioka Coefficient, Capital Mobility, Financial Development, Economic Growth, sub-Saharan Africa