Financial intermediaries and economic growth in Ghana: an empirical investigation
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Authors
Nyasha, Sheilla
Issue Date
2015-10
Type
Working Paper
Language
en
Keywords
Ghana, Bank-Based Financial Development, Economic Growth
Alternative Title
Abstract
This paper examines the impact of bank-based financial development on economic growth in
Ghana during the period from 1970 to 2014 – using the autoregressive distributed lag
(ARDL) bounds testing approach. Unlike some previous studies, the current study uses five
proxies to measure the level of bank-based financial development, including a composite
index of bank-based financial development derived from various financial development
indicators. The empirical results of this study show that the impact of bank-based financial
development on economic growth in Ghana is sensitive to the proxy used to measure bankbased
financial development. The results also tend to vary over time. Overall, our results
show that when the ratio of domestic credit extension to the private sector by banks to GDP,
and the composite index are used as proxies, bank-based financial development has a
positive impact on economic growth in Ghana. However, when the ratio of deposit money
banks' assets to GDP is used as a proxy, bank-based financial development has a negative
impact on economic growth. These results apply, irrespective of whether the analysis is done
in the short run or in the long run. Other results show that when the ratio of the claims of
deposit money banks on the private sector to broad money is used as a proxy for bank-based
financial development, bank-based financial development is found to have a negative impact
on economic growth in the short run, but a positive impact in the long run. However, when
the ratio of quasi liquid liabilities to GDP is used, the relationship tends to be positive in the
short run, but negative in the long run.
Description
FINANCIAL INTERMEDIARIES AND ECONOMIC GROWTH IN GHANA: AN
EMPIRICAL INVESTIGATION