JEFMS Journal

ABSTRACT:

The study examined Economic Growth and Financial Deepening – A Case Study of Nigeria. The study employed the Variance Inflation Factor (VIF) to test the presence of multicollinearity in the model, Augmented Dicky Fuller (ADF) unit root test to check the stationarity of the variables, the Error Correction Mechanism (ECM) was used to estimate the model established, and the Pairwise Granger Causality test to check the existence of causality among the dependent and independent variables. The result of the study of cointegration and equilibrium test of Economic Growth and Financial Deepening shows generally, a long run cointegration between economic growth and financial deepening. However, further study of the relationship shows that money supply shows a significant relationship with economic growth, while credit to private sector shows insignificant relationship with economic growth. Furthermore, there is no significant causal relationship between credit to private sector and gross domestic product, while there is an existence of bi-directional causality between money supply and gross domestic product. The implication of this is that money supply as it can cause economic growth and vice versa, while credit to private sector does not have any impact on economic growth.

REFERENCES:

1) Adediran, O. S., Oduntan, E., & Matthew, O. (2017). Financial development and inclusive growth in Nigeria: A multivariate approach. Journal of Internet Banking and Commerce, 22(8), 14.

2) Agu, C., & Chukwu, J. (2009). Multivariate causality between financial depth and economic growth in Nigeria. African Review of Money, Finance and Banking, 7-21.

3) Alrabadi, D. W. H. & Kharabsheh, B. A. (2016). Financial deepening and economic growth: The Case of Jordan. Journal of Accounting and Finance, 16(6)

4) Andabai, P.W. & Igbodika, M. N. (2015). A causality analysis of financial deepening and performance of Nigerian economy (1990-2013). African Research Review: An International Multidisciplinary Journal, Ethiopia, 9(4), 39, 249-263

5) Boyd, J. H., & Prescott, E. C. (1986). Financial intermediary-coalitions. Journal of Economic Theory, 38(2), 211-232

6) Darrat, A. F. (1999), “Are Financial Deepening and Economic Growth Causality Related? Another look at the Evidence” International Economic Journal, Volume 13, Number 3, Autumn.

7) Demirgüç-Kunt, Asli; Levine, Ross. 2008. Finance, Financial Sector Policies, and Long-Run Growth. Policy Research Working Paper; No. 4469. World Bank, Washington, DC. © World Bank. License: CC BY 3.0 IGO.”

8) Hassan, M. K., Sanchez, B., & Yu, J. (2011). Financial development and economic growth: New evidence from panel data. Quarterly Review of Economics and Finance, 51(1), 88-104.

9) Igwe A, Ede C,E, Ukpere W.I(2014). Financial Deepening and Economic Growth in Nigeria(1981 – 2012): A managerial Economic Perspective. Risk Governance & Control. Financial markets & Institutions Journal Vol.4, Issue 4

10) Ireland, P. N. (1994), “Money and Growth: An Alternative Approach” American Economic Review, March, pp.47-65.

11) Jung, W. S. (1986), “Financial Development and Economic Growth: International Evidence”. Economic Development and Cultural Change, 34: 333-346.

12) Kawode, I. E. (2015). Capital market and the performance of the manufacturing industries in Nigeria 1970-2012. European Journal of Business and Management, 7(13), 11-22.

13) Kuznets, S. (1955), “Economic Growth and Income Inequality”. The American Economic Review 45 (1):1-28

14) Levine, R. (2001). Bank based or Market based financial system: which is better? Carlson School of Management, University of Minnesota Working Paper, 55455, William Davidson Institute Working Paper 442

15) Lucas, R. E. (1988), “On the Mechanics of Economic Development”. Journal of Monetary Economics (22): 3-42.

16) Luqman S. (2014). Financial Deepening and Economic Growth in Pakistan: An application of Cointegration and VECM Approach. Interdisciplinary Journal of Contemporary Research in Business, 5(12).

17) McKinnon, R. (1973), Money and Capital in Economic Development, Washington, D.C.: Brookings Institution

18) Mesagan, E., Olunkwa N. & Yusuf, I. (2018). Financial development and manufacturing performance: The Nigerian case. Studies in Business and Economics, 13(1).

19) Nazmi, N. (2005). Deregulation, financial deepening and economic growth: The case of Latin America. The Quarterly Review of Economics and Finance, 45(2), 447-459. https://doi.org/10.1016/j.qref.2004.12.0

20) Ndebbio, J. E. U. (2004). Economic Growth And Development: Evidence from Selected sub-Saharan African Countries. African Economic

21) Nwanna, I.O. & Chinwudu, C.F. (2016). The Effect of financial deepening on economic growth in Nigeria (1985 -2014). Journal of Economics and Finance (IOSR-JEF) 7(4) 11-28

22) Nzotta, S. M. & Okereke, E. J. (2009). Financial Deepening And Economic Development Of Nigeria: An Empirical Investigation African Journal of Accounting, Economics, Finance and Banking Research Vol. 5. No. 5.

23) Okafor. V, Bowale. E, Onabote. A, Afolabi. A, & Ejemeyovwi. J(2021). Financial Deepening and Economic Growth in Nigeria: A Johannsen and Error Correction Model Technique. International Journal of Financial Research, Vol. 12, No.2. doi:10.5430/ijfr.v12n2p26

24) Okoli, M. N. ( 2010), “Evaluating the Nexus Between Financial Deepening and Stock Market in Nigeria”. European Scientific Journal vol. 8, No.15, July

25) Onwumere J.U.J, V. Onudugo & I. G. Ibe, (2013). Financial Structure and Economic Growth: Evidence from Nigeria. Global Journal of Management and Business Research Finance, Volume 13 Issue 5 Version Research Consortium. Research paper 142.

26) Robinson, J. (1952), “The Generalization of the General Theory”, In the Rate of Interest and Other Essays, London: MacMillan

27) Shaw, E. (1973), Financial Deepening in Economic Development, Oxford: Oxford University Press.

28) Solow, R. M(1957) . A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics 70:65–94.