Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria

Godwin Chigozie Okpara; Anne Nwannennaya Onoh; Benson Mbonu Ogbonna; Eugene Iheanacho; Iheukwumere Kelechi

doi:doi:10.11648/j.jfa.20180601.14

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Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria

Godwin Chigozie Okpara, Anne Nwannennaya Onoh, Benson Mbonu Ogbonna, Eugene Iheanacho, Iheukwumere Kelechi

Received: 26 January 2018 Accepted: 11 February 2018 Published: 14 March 2018

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Abstract

This work explored the relationship between financial development and economic growth in Nigeria. Specifically it investigated the extent to which financial development engenders economic growth. It also verified the existence of supply leading and/or demand following hypotheses in Nigeria. To evaluate these, the researchers firstly determined the stationarity of the variables which informed the use of cointegration and then the vector error correction model to finding the long run impact of financial development variables on the growth of the economy. The diagnostic test was employed to determine the authenticity and stability of our model. The researchers also employed the Granger Causality test to investigate the existence of supply leading and/or demand following hypothesis. The results of the analyses show that there is a longrun relationship between financial development and economic growth in Nigeria and that besides the metric for banking system financing of the economy variable which is significantly inadequate, all other financial development indicators engender economic growth. Our diagnostic test shows that the model is adequate, plausible, and stable. The short run causality test shows bidirectional causality between capital market liquidity or economic volatility and the growth of the economy while market capitalization ratio, broad money velocity and the banking system rate of financing the economy drive economic growth with no feedback effect. On the basis of the findings, the researchers call on the government to articulate reform packages (such that may involve vigorous financial inclusion) capable of enhancing the banking sectors’ involvement in the financing of the economy so as to achieve enormous economic growth.

DOI	10.11648/j.jfa.20180601.14
Published in	Journal of Finance and Accounting (Volume 6, Issue 1, January 2018)
Page(s)	26-34
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Financial Development, Economic Growth, Supply Leading, Demand Following Hypotheses, Cointegration

References

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APA Style

Godwin Chigozie Okpara, Anne Nwannennaya Onoh, Benson Mbonu Ogbonna, Eugene Iheanacho, Iheukwumere Kelechi. (2018). Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria. Journal of Finance and Accounting, 6(1), 26-34. https://doi.org/10.11648/j.jfa.20180601.14

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ACS Style

Godwin Chigozie Okpara; Anne Nwannennaya Onoh; Benson Mbonu Ogbonna; Eugene Iheanacho; Iheukwumere Kelechi. Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria. J. Finance Account. 2018, 6(1), 26-34. doi: 10.11648/j.jfa.20180601.14

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AMA Style

Godwin Chigozie Okpara, Anne Nwannennaya Onoh, Benson Mbonu Ogbonna, Eugene Iheanacho, Iheukwumere Kelechi. Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria. J Finance Account. 2018;6(1):26-34. doi: 10.11648/j.jfa.20180601.14

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@article{10.11648/j.jfa.20180601.14,
  author = {Godwin Chigozie Okpara and Anne Nwannennaya Onoh and Benson Mbonu Ogbonna and Eugene Iheanacho and Iheukwumere Kelechi},
  title = {Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria},
  journal = {Journal of Finance and Accounting},
  volume = {6},
  number = {1},
  pages = {26-34},
  doi = {10.11648/j.jfa.20180601.14},
  url = {https://doi.org/10.11648/j.jfa.20180601.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20180601.14},
  abstract = {This work explored the relationship between financial development and economic growth in Nigeria. Specifically it investigated the extent to which financial development engenders economic growth. It also verified the existence of supply leading and/or demand following hypotheses in Nigeria. To evaluate these, the researchers firstly determined the stationarity of the variables which informed the use of cointegration and then the vector error correction model to finding the long run impact of financial development variables on the growth of the economy. The diagnostic test was employed to determine the authenticity and stability of our model. The researchers also employed the Granger Causality test to investigate the existence of supply leading and/or demand following hypothesis. The results of the analyses show that there is a longrun relationship between financial development and economic growth in Nigeria and that besides the metric for banking system financing of the economy variable which is significantly inadequate, all other financial development indicators engender economic growth. Our diagnostic test shows that the model is adequate, plausible, and stable. The short run causality test shows bidirectional causality between capital market liquidity or economic volatility and the growth of the economy while market capitalization ratio, broad money velocity and the banking system rate of financing the economy drive economic growth with no feedback effect. On the basis of the findings, the researchers call on the government to articulate reform packages (such that may involve vigorous financial inclusion) capable of enhancing the banking sectors’ involvement in the financing of the economy so as to achieve enormous economic growth.},
 year = {2018}
}

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TY  - JOUR
T1  - Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria
AU  - Godwin Chigozie Okpara
AU  - Anne Nwannennaya Onoh
AU  - Benson Mbonu Ogbonna
AU  - Eugene Iheanacho
AU  - Iheukwumere Kelechi
Y1  - 2018/03/14
PY  - 2018
N1  - https://doi.org/10.11648/j.jfa.20180601.14
DO  - 10.11648/j.jfa.20180601.14
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 26
EP  - 34
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20180601.14
AB  - This work explored the relationship between financial development and economic growth in Nigeria. Specifically it investigated the extent to which financial development engenders economic growth. It also verified the existence of supply leading and/or demand following hypotheses in Nigeria. To evaluate these, the researchers firstly determined the stationarity of the variables which informed the use of cointegration and then the vector error correction model to finding the long run impact of financial development variables on the growth of the economy. The diagnostic test was employed to determine the authenticity and stability of our model. The researchers also employed the Granger Causality test to investigate the existence of supply leading and/or demand following hypothesis. The results of the analyses show that there is a longrun relationship between financial development and economic growth in Nigeria and that besides the metric for banking system financing of the economy variable which is significantly inadequate, all other financial development indicators engender economic growth. Our diagnostic test shows that the model is adequate, plausible, and stable. The short run causality test shows bidirectional causality between capital market liquidity or economic volatility and the growth of the economy while market capitalization ratio, broad money velocity and the banking system rate of financing the economy drive economic growth with no feedback effect. On the basis of the findings, the researchers call on the government to articulate reform packages (such that may involve vigorous financial inclusion) capable of enhancing the banking sectors’ involvement in the financing of the economy so as to achieve enormous economic growth.
VL  - 6
IS  - 1
ER  -

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Author Information

Godwin Chigozie Okpara

Department of Banking and Finance, Abia State University, Uturu, Nigeria
Anne Nwannennaya Onoh

Department of Management, Abia State University, Uturu, Nigeria
Benson Mbonu Ogbonna

Department of Economics, Abia State University, Uturu, Nigeria
Eugene Iheanacho

Department of Economics, Abia State University, Uturu, Nigeria
Iheukwumere Kelechi

Department of Economics, Abia State University, Uturu, Nigeria

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APA Style

Godwin Chigozie Okpara, Anne Nwannennaya Onoh, Benson Mbonu Ogbonna, Eugene Iheanacho, Iheukwumere Kelechi. (2018). Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria. Journal of Finance and Accounting, 6(1), 26-34. https://doi.org/10.11648/j.jfa.20180601.14

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ACS Style

Godwin Chigozie Okpara; Anne Nwannennaya Onoh; Benson Mbonu Ogbonna; Eugene Iheanacho; Iheukwumere Kelechi. Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria. J. Finance Account. 2018, 6(1), 26-34. doi: 10.11648/j.jfa.20180601.14

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AMA Style

Godwin Chigozie Okpara, Anne Nwannennaya Onoh, Benson Mbonu Ogbonna, Eugene Iheanacho, Iheukwumere Kelechi. Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria. J Finance Account. 2018;6(1):26-34. doi: 10.11648/j.jfa.20180601.14

Copy | Download

@article{10.11648/j.jfa.20180601.14,
  author = {Godwin Chigozie Okpara and Anne Nwannennaya Onoh and Benson Mbonu Ogbonna and Eugene Iheanacho and Iheukwumere Kelechi},
  title = {Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria},
  journal = {Journal of Finance and Accounting},
  volume = {6},
  number = {1},
  pages = {26-34},
  doi = {10.11648/j.jfa.20180601.14},
  url = {https://doi.org/10.11648/j.jfa.20180601.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20180601.14},
  abstract = {This work explored the relationship between financial development and economic growth in Nigeria. Specifically it investigated the extent to which financial development engenders economic growth. It also verified the existence of supply leading and/or demand following hypotheses in Nigeria. To evaluate these, the researchers firstly determined the stationarity of the variables which informed the use of cointegration and then the vector error correction model to finding the long run impact of financial development variables on the growth of the economy. The diagnostic test was employed to determine the authenticity and stability of our model. The researchers also employed the Granger Causality test to investigate the existence of supply leading and/or demand following hypothesis. The results of the analyses show that there is a longrun relationship between financial development and economic growth in Nigeria and that besides the metric for banking system financing of the economy variable which is significantly inadequate, all other financial development indicators engender economic growth. Our diagnostic test shows that the model is adequate, plausible, and stable. The short run causality test shows bidirectional causality between capital market liquidity or economic volatility and the growth of the economy while market capitalization ratio, broad money velocity and the banking system rate of financing the economy drive economic growth with no feedback effect. On the basis of the findings, the researchers call on the government to articulate reform packages (such that may involve vigorous financial inclusion) capable of enhancing the banking sectors’ involvement in the financing of the economy so as to achieve enormous economic growth.},
 year = {2018}
}

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TY  - JOUR
T1  - Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria
AU  - Godwin Chigozie Okpara
AU  - Anne Nwannennaya Onoh
AU  - Benson Mbonu Ogbonna
AU  - Eugene Iheanacho
AU  - Iheukwumere Kelechi
Y1  - 2018/03/14
PY  - 2018
N1  - https://doi.org/10.11648/j.jfa.20180601.14
DO  - 10.11648/j.jfa.20180601.14
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 26
EP  - 34
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20180601.14
AB  - This work explored the relationship between financial development and economic growth in Nigeria. Specifically it investigated the extent to which financial development engenders economic growth. It also verified the existence of supply leading and/or demand following hypotheses in Nigeria. To evaluate these, the researchers firstly determined the stationarity of the variables which informed the use of cointegration and then the vector error correction model to finding the long run impact of financial development variables on the growth of the economy. The diagnostic test was employed to determine the authenticity and stability of our model. The researchers also employed the Granger Causality test to investigate the existence of supply leading and/or demand following hypothesis. The results of the analyses show that there is a longrun relationship between financial development and economic growth in Nigeria and that besides the metric for banking system financing of the economy variable which is significantly inadequate, all other financial development indicators engender economic growth. Our diagnostic test shows that the model is adequate, plausible, and stable. The short run causality test shows bidirectional causality between capital market liquidity or economic volatility and the growth of the economy while market capitalization ratio, broad money velocity and the banking system rate of financing the economy drive economic growth with no feedback effect. On the basis of the findings, the researchers call on the government to articulate reform packages (such that may involve vigorous financial inclusion) capable of enhancing the banking sectors’ involvement in the financing of the economy so as to achieve enormous economic growth.
VL  - 6
IS  - 1
ER  -

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