Does Financial Development Explain the Industrialization of Great Lakes Countries? A Multidimensional Approach
DOI:
https://doi.org/10.47941/ijf.1350Keywords:
Financial development, Industrialization, Great Lakes Countries, CEPGLAbstract
Purpose: The objective of this study is to analyze the effects of financial development on the industrialization of countries in the Great Lakes region. To this effect, we use data from secondary sources mainly from the World Bank databases covering the period 1985 to 2020.
Methodology: The methodology was based on the Feasible Generalized Least Squares and Autoregressive Distributed Lag model as an estimation technique.
Results: The results show that financial development through domestic credit granted to economies, negatively influences the industrialization of Great Lakes countries. This effect is true for the quality of institutional and the total rent of natural resources. In addition, the rate of trade openness, human capital, and private investment have a positive and significant effect on the industrial process of the countries of the region under examination.
Unique Contribution to Theory, Policy and Practice: For the financial system to be sufficiently robust and contribute to the process of industrialisation in the region, it is necessary to strengthen positive financial sector reforms appropriately, improve the business climate to enhance private sector participation in industrial transformation, strengthen the accountability and effectiveness of governments in the region and, most importantly, mitigate the effects of war by ensuring long-term political stability to promote better governance structures for industrial development.
Downloads
References
Acemoglu, D., & Zilibotti, F. (1997). Was Prometheus unbound by chance? Risk, diversification, and growth. Journal of political economy, 105(4), 709-751.
Akinlo, A. E., & Egbetunde, T. (2010). Financial development and economic growth: The experience of 10 sub-Saharan African countries revisited. The review of finance and banking, 2(1).
Alege, P. O., & Ogunrinola, I. O. (2008). Financial sector reforms and growth of the Nigerian economy. lagos Journal of Banking, Finance & Economic Issues, 2(1), 50-70.
Atangana Ondoa, H, (2018), Les facteurs d'industrialisation en Afrique francophone subsaharienne (pp, 142-165), La Francophonie conomique, 1,
Avom, D,, Nkoa, B, E, O, (2021), Politiques publiques et transformation industrielle dans un contexte d'mergence : une analyse du cas de l'Afrique Subsaharienne, Harmattan, Paris, 25-52,
Balassa, B, (1990), Financial liberalization in developing countries, Studies in Comparative International Development, 25(4), 56-70,
World Bank, (2022), World Development Indicators Data, www, world bank, org
Beck, T, & Levine, R, (2005), Legal institutions and financial development, In Handbook of new institutional economics (pp, 251-278), Springer, Boston, MA,
Beck, T., & Levine, R. (2002). Industry growth and capital allocation: does having a market-or bank-based system matter? Journal of financial economics, 64(2), 147-180.
Beck, T., Demirgüç-Kunt, A., & Levine, R. (2009). Financial institutions and markets across countries and over time data and analysis. World Bank policy research working paper, (4943).
Beji, S., & Belhadj, A. (2022). The Institutional Approach to Financial Development: Panel Study for the MENA Region. In Key Challenges and Policy Reforms in the MENA Region: An Economic Perspective (pp. 143-161). Cham: Springer International Publishing.
Bencivenga, V, R, & Smith, B, D, (1991), Financial intermediation and endogenous growth,
C. Eggoh 1, J., & Villieu 2, P. (2013). A re-examination of the non-linearity between financial development and economic growth. Journal of Political Economy, (2), 211-236.
Cecchetti, S, G, & Kharroubi, E, (2012), Reassessing the impact of finance on growth,
Corden, W. M., & Neary, J. P. (1982). Booming sector and de-industrialisation in a small open economy. The economic journal, 92(368), 825-848.
Di Maio, M. (2009). Industrial policies in developing countries: history and perspectives. Industrial policy and development, 107-143.
Dodzin, S., & Vamvakidis, A. (2004). Trade and industrialization in developing economies. Journal of Development Economics, 75(1), 319-328.
Efobi, U, Asongu, S, Okafor, C, Tchamyou, V, & Tanankem, B, (2019), Remittances, finance and industrialisation in Africa, Journal of Multinational Financial Management, 49, 54-66,
Eggoh, J, C, (2011), Recent developments in the literature on finance and economic growth, Developing Worlds, (3), 141-150,
Ewetan, O, & Ike, D, (2014), Does Financial Sector Development Promote Industrialization in Nigeria, International Journal of Research in Social Sciences, 4(1), 17-25,
Fox, L,, & Oviedo, A, M, (2013), Institutions and Job Growth in African Manufacturing: Does Employment Protection Regulation Matter?", Journal of African Economies, 22(4), 616-650,
Gui-Diby, S. L., & Renard, M. F. (2015). Foreign direct investment inflows and the industrialization of African countries. World Development, 74, 43-57.
Gurley, J, G,, Patrick, H, T,, & Shaw, E, S, (1965), The financial structure of Korea, Bank of Korea, Research Department,
Hoechle, D. (2007). Robust standard errors for panel regressions with cross-sectional dependence. The stata journal, 7(3), 281-312.
Kabango, G, P,, & Paloni, A, (2011), Financial liberalization and the industrial response: Concentration and entry in Malawi, World Development, 39(10), 1771-1783,
Kang, S. J., & Lee, H. (2011). Foreign direct investment and de-industrialisation. The World Economy, 34(2), 313-329.
Kaya, Y. (2010). Globalization and industrialization in 64 developing countries, 1980-2003. Social Forces, 88(3), 1153-1182.
Khan, A. (2001). Financial development and economic growth. Macroeconomic dynamics, 5(3), 413-433.
King, R, G,, & Levine, R, (1993), Finance and growth: Schumpeter might be right, The quarterly journal of economics, 108(3), 717-737,
King, R. G., & Levine, R. (1993). Financial intermediation and economic development. Capital markets and financial intermediation, 156-189.
Larrain, B, (2006), Do banks affect the level and composition of industrial volatility, The Journal of Finance, 61(4), 1897-1925,
Levine, R, (2005), Finance and growth: theory and evidence, Handbook of economic growth, 1, 865-934,
Lo, S. B., & Ramde, F. (2019). Financial development and structural transformation in African Franc zone countries: a panel-VAR approach. Economic Interventions Review. Papers in Political Economy, (61).
McCaig, B., & Stengos, T. (2005). Financial intermediation and growth: Some robustness results. Economics Letters, 88(3), 306-312.
McKinnon, R, I, (1989), Financial liberalization and economic development: A reassessment of interest-rate policies in Asia and Latin America, Oxford Review of Economic Policy, 5(4), 29-54,
Okodua, H,, & Ewetan, O, O, (2013), Stock market performance and sustainable economic growth in Nigeria: A bounds testing co-integration approach, Journal of Sustainable Development, 6(8), 84,
Ongo Nkoa 1, B. E. (2016). Foreign direct investment and Africa's industrialization: a new look. Innovations, (3), 173-196.
Pagano, M, (1993), Financial markets and growth: an overview, European economic review, 37(2-3), 613-622,
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326.
Raddatz, C, (2006), Liquidity needs and vulnerability to financial underdevelopment, Journal of financial economics, 80(3), 677-722,
Rajan, R, G,, & Zingales, L, (2001), Financial systems, industrial structure, and growth,
Report, AfDB, (2019), African Economic Outlook,
Report, O, M, D, (2013), African Union Commission (AUC), United Nations Economic Commission for Africa (ECA), African Development Bank (AfDB)
Samouel, B., & Aram, B. (2016). The determinants of industrialization: Empirical evidence for Africa. European Scientific Journal, 12(10), 219-239.
Stulz, R. M. (2000). Financial structure, corporate finance and economic growth. International Review of Finance, 1(1), 11-38.
Udoh, E,, & Ogbuagu, U, R, (2012), Financial sector development and industrial production in Nigeria (1970-2009): An ARDL cointegration approach, Journal of Applied Finance and Banking, 2(4), 49,
Udoh, E., & Ogbuagu, U. R. (2012). Financial sector development and industrial production in Nigeria (1970-2009): An ARDL cointegration approach. Journal of Applied Finance and Banking, 2(4), 49.
Zilibotti, F, (1994), Endogenous Growth and Intermediation in an 'Archipelago'Economy, The Economic Journal, 104(423), 462-473,
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Ndyanabo Rutazihana Pascal , Muluh George Achu , Ngueuleweu Tiwang Gildas
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
