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Abstract
This study analyzes financial and economic determinants of sustainable economic performance using the quantile regression for the period from 1970 to 2016 for Egypt, Nigeria and South Africa. The main drivers of sustainable economic performance vary among the economies. It is driven by trade openness, government expenditure and political stability in Egypt. In South Africa, the desired threshold for financial development to impact growth is reached. Also, there is complementarity between financial development and trade openness. This proves their advancement at the domestic financial markets in the direction to sustainable economic performance. Interestingly, Nigerian economy’s sustainable growth is enhanced by capital account openness. Policies that will boast intra trade in Africa are encouraged as the AfCFTA has come to spur manufacturing activities on the continent. At the same time, emphasis should be set to improve financial and economic determinants of sustainable economic performance.
Highlights
A good financial system is the vehicle through which savings are mobilized to avail investment opportunities and this statement has made the seminal works of Shaw (1973) get greater acceptance in developing economies
The GDP series is deflated to the constant basic price based on year 2000 (2010=100), COP is the capital account openness, FD stands for financial development index, TOP represents trade openness, GEX is the government expenditure and PST is the political stability variable
Nigeria had a high inflow of capital, but that has no influence on the advancement of domestic financial market, as the interaction effects of FD with COP stymied economic growth at the upper quantile
Summary
A good financial system is the vehicle through which savings are mobilized to avail investment opportunities and this statement has made the seminal works of Shaw (1973) get greater acceptance in developing economies. According to Rajan and Zingales (2003), institutional quality is crucial toward the finance-growth relationship and countries which have good access to credit services tend to improve their economic performance Elkhuizen et al (2017) contends that the variations on the impact of financial liberalization on economic growth between developed and developing economies is due to differences in terms of formal institutions. This was supported by Njikam (2017) and found a positive relationship between financial liberalization and economic growth in African countries. The remainder of this study is divided into the following: Section 2, data and empirical models, Section 3 data analysis and discussion, and Section 4 presents concluding remarks
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