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The relationship between financial deepening and economic growth in Tanzania
Author(s) -
Akinboade Oludele A.
Publication year - 2000
Publication title -
journal of international development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.533
H-Index - 66
eISSN - 1099-1328
pISSN - 0954-1748
DOI - 10.1002/1099-1328(200010)12:7<939::aid-jid668>3.0.co;2-i
Subject(s) - financial repression , financial deepening , economics , ordinary least squares , tanzania , liberalization , real gross domestic product , financial intermediary , financial system , finance , monetary economics , interest rate , econometrics , market economy , socioeconomics
The study examines the relationship between financial deepening and economic growth in Tanzania. The ratio of bank deposit liability to nominal gross national product is used as a measure of financial deepening and modelled for relationship with real per capita income. The static ordinary least squares (SOLS) and the dynamic ordinary least squares (DOLS) estimation methods are used. The model examines the periods of financial repression and of financial liberalization. The results suggest that though the real interest rate has insignificant impact overall, it is mixed for the two periods under consideration. Whereas, its impact on financial deepening is negative during the period of financial repression, it exerts a small but positive impact on financial development during the period of financial liberalization. The relationship between financial deepening and economic growth appears to be surprisingly negative and significant overall and during the period of financial liberalization but insignificant during financial repression. The results from the tests for causality suggest that financial deepening and economic growth are however independent in Tanzania. Copyright © 2000 John Wiley & Sons, Ltd.