Abstract
<p><em>This paper provides an empirical assessment of the relationship between banking, liquidity, investment, terms of trade, bank solvency ratio, financial development and economic growth in the WAEMU zone. The analysis focuses on 7 countries of the West African Economic and Monetary Union (WAEMU) and covers the period 1994-2015. Using the panel data approach, we show that economic growth is positively </em><em>related </em><em>with banking on liquidity. In addition, the results highlight the impact of bank liquidity on economic growth but mitigate when it is associated with the investment.</em></p>
Highlights
Since the work of McKinnon (1973) and Shaw (1973), the relationship between financial development and economic growth has gained renewed interest
This paper provides an empirical assessment of the relationship between banking, liquidity, investment, terms of trade, bank solvency ratio, financial development and economic growth in the West African Economic and Monetary Union (WAEMU) zone
Conclusion and Implications of Economic Policies The objective of this study was to analyze the impact of bank over-liquidity on the economic growth of the WAEMU countries
Summary
Since the work of McKinnon (1973) and Shaw (1973), the relationship between financial development and economic growth has gained renewed interest. Huang and Lin (2009) find an insignificant correlation between financial development and economic growth in low-income countries, while this relationship is positive and robust in the case of high-income countries. A World Bank study has shown that despite the low level of development of the banking sector in African countries, it is excessively liquid (Honohan & Beck, 2007). If a bank’s performance stems from its liquidity situation (Goldstein & Pauzner, 2005), it is possible to assume that the bank’s performance factors are those of bank over liquidity. This one can be defined as an excess of bank cash held beyond what is needed to cope with www.scholink.org/ojs/index.php/ape
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