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Working Paper 1998-004B

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"Financial Intermediation and Economic Growth in Southern Africa"
by Donald S. Allen, and Leonce Ndikumana

Using various indicators of financial development, this paper investigates the role of financial intermediation in stimulating economic growth for members of the Southern African Development Community (SADC). The results lend some support to the hypothesis that financial development is positively correlated with the growth rate of real per capita GDP. This relationship is more evident in regressions that use pooled data (5-year cross sections) than those using annual data. This finding suggests that the finance-growth nexus is a long-run phenomenon. The data indicate that while Botswana and Mauritius are catching up with South Africa towards a high-income steady state, the rest of the countries are stagnating to low income levels and low growth rates.

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