An Empirical Study of Financial Development and Economic Growth in Africa

The article reports on the nexus between financial development and economic progress between English-speaking and French-speaking African countries from 1970 to 2017, focusing on non-linearities. To this end, Smooth Transition Regression together with Granger Causality modelling methods are employed to achieve the objectives of this study. Empirical evidence obtained is such that, there exits significant short and long-term relationships between financial development and economic growth in English-speaking countries. During economic contractions, a statistically significant error correction term indicates rapid adjustment of financial development towards long-term equilibrium, while in periods of rapid economic expansion, the rate of adaptation becomes negligible. In French-speaking countries, during economic contractions, a statistically significant error correction term indicated a slow adjustment of financial development towards long-term equilibrium, suggesting a steady correlation even in challenging economic conditions. Granger causality analysis showed unique patterns in both language groups, emphasizing complex contextual connections between financial development and economic growth. Furthermore, the study rejects linearity in both sets of countries, emphasizing the necessity for nuanced understanding and policy considerations to foster economic growth in African nations. This research provides valuable insights for policymakers aiming to promote sustainable economic development in the dynamic contexts of English-speaking and French-speaking African countries