Finance–growth nexus in sub-Saharan Africa revisited: evidence based on a new composite index

Abstract

In this paper, we use a panel dataset of 33 countries to revisit the finance–economic growth nexus in sub-Saharan Africa for the period 1990–2015. Unlike previous studies, we proxy finance with a composite index of financial development which accounts for the multidimensionality of financial development. Also, we consider real sector growth in our empirical analyses. We establish long-run relationships between finance and (real sector and economic) growth. We provide evidence to show that finance and (real sector and economic) growth cause each other. Overall, the findings suggest that the finance (real sector and economic)–growth nexus is sensitive to the choice of econometric methodology.