Financial and economic determinants of sustainable economic growth in Egypt, Nigeria and South Africa

This paper explores

Publisher Summary This chapter discusses the financial development and economic growth in underdeveloped countries. An observed characteristic of the process of economic development over time, in a market-oriented economy using the price mechanism to allocate resources, is an increase in the number and variety of financial institutions and a substantial rise in the proportion not only of money but also of the total of all financial assets relative to GNP and to tangible wealth. Typical statements indicate that the financial system somehow accommodates—or, to the extent that it malfunctions, it restricts—growth of real per capita output. Such an approach places emphasis on the demand side for financial services; as the economy grows it generates additional and new demands for these services, which bring about a supply response in the growth of the financial system. In this view, the lack of financial institutions in underdeveloped countries is simply an indication of the lack of demand for their services.

Several studies have examined the causal relationship between government expenditure and economic growth. These studies yielded mixed results. Therefore, this study seeks to know the direction and nature of the relationship between government expenditure and economic growth in Egypt during the period from 1952 to 2020. Advanced econometric models were used for this purpose. The ADF (Augmented-Dickey Fuller) and PP (Phillips and Perron) test were used to verify the stationarity of the time series of the variables under study. The Granger causality test was also relied on to determine the direction of the relationship between government expenditure and economic growth in Egypt, and the VAR model (Vector auto regression model) to find out the nature of the relationship between government expenditure and economic growth. The study found that government expenditure is the motive of economic growth in Egypt, and the relationship between them is positive, meaning that the relationship between them is in one direction and starts from government expenditure . This means that the second trend, led by Keynes, applies to the state of the Egyptian economy. It also expresses that the Egyptian economy is still dependent on the government to achieve economic growth and is governed by excessive governmental interventions, tight administrative policies and restrictions, a large and inefficient public sector and a low role for the private sector. In the future, the researcher hopes that other studies will seek to search for the direction and nature of the relationship between the components of government expenditure and economic growth in Egypt.

This study examines the complement of financial development, trade openness, political stability and integrating government expenditure on Egyptian economy using time series annual data covering the period 1977 until 2018. This study used the ARDL-ECM estimates to determine the long and short-run cointegration between the series. The estimated results indicated that the financial development enhances growth in the long-run, while the political stability undermined the economic growth in the long-run. Interestingly, we found financial development, trade openness and government expenditure Granger cause economic growth in the short-run, while political stability Granger causes economic growth in both short and long-run; and a similar result with the causal relationship appeared in the strong causal relationship condition. Overall, this study showed that both financial development and trade openness gave evidence of causing growth, but the political stability does not. Thus, the reform policies should continue, while adopting measures to ensure that all the determinants are complementing to growth in Egypt as they are all pivotal and it is imperative for policy analysts to put into perspective when formulating policies as the study captures a novel political stability variable towards growth.

PurposeThis paper aims to discuss the evolution of the Egyptian banking sector and the main trends in financial development in Egypt. The purpose of this study is to examine empirically the relationship between the development of the financial sector and economic growth in Egypt between 1980 and 2016.Design/methodology/approachThe paper draws comparisons based on critical financial indicators between Egypt and selected emerging markets and developing economies. It uses a new data set of financial development indexes released by the International Monetary Fund. This paper uses econometric time series modelling of bivariate regressions for real growth per capita and measures of financial development to assess the relationship between financial development and economic growth in Egypt.FindingsThere are three specific findings based on the empirical analysis. First, there is a strong association between real growth per capita and financial development measured by money supply to GDP. Second, access to and the efficiency of banking services are not associated with real per capita income. Third, the Financial Markets Access Index – which compiles data on market capitalization outside of the top ten largest companies and the number of corporate issuers of debt – indicates a robust association with real per capita GDP.Originality/valueThe paper uses advanced empirical investigation techniques and new data sets available to assess the critical relationship between finance and growth in Egypt. The main policy implications of the empirical results of this paper suggest a stronger focus on promoting a more proactive role for the financial services industry in Egypt. In particular, there is a critical role for bank financing to support the private sector to maintain an inclusive growth momentum. Further development of the capital market will promote sustainability of such economic growth.

This study examines the association between fiscal sustainability indicators and Egypt’s economic growth from 1980 to 2018. Fiscal sustainability refers to a government’s ability to generate sufficient revenue to cover its costs and debt obligations in the long run without excessive borrowing or money creation. Egypt’s economic growth has slowed, raising questions about fiscal sustainability. This study aimed to analyze the dynamic relationship between fiscal sustainability indicators (government revenue, expenditure, external debt) and economic growth in Egypt. The autoregressive distributed lag (ARDL) bounds testing approach and unrestricted error correction model were applied to annual data from 1980 to 2018. A dynamic link was found between fiscal sustainability indicators and economic growth. Government expenditure and external debt significantly impacted economic expansion in the long term, while government revenue did not. Fiscal sustainability, measured by growth in total government expenses, external debt obligations, and revenue, significantly influences Egypt’s economic growth. Prudent fiscal management is crucial for sustained economic development. Policymakers should focus on controlling government spending, limiting external debt, and improving revenue generation to promote long-term economic growth in Egypt. Fiscal sustainability must balance critical investments in public services. Carefully managing fiscal deficits is key to unleashing Egypt’s economic potential. This study provides valuable insights into the connection between fiscal policy and economic growth in Egypt, informing policymakers’ decisions.

Following the Egyptian revolution in January 2011, the need for a new development approach has become essential. That is development with a human face. This study aims to contribute to the discussion on sustainable economic growth in Egypt by examining the interdependence of inclusive governance, economic and social inclusion, through empirically assessing the relationship between governance indicators and economic growth in Egypt. The study applied a vector error correction model (VECM) to assess the causal relationship between the two key variables, using Worldwide Governance Indicators (WGI) from the World Bank and economic indicators from Economic Intelligent Unit (EIU) database over the period 1996-2016. The results show that the Egyptian economy suffered during the study period from a significant decrease in the level of governance. The analysis indicated that most of the governance indicators have a causal relationship with economic growth except corruption control, while economic growth has a positive effect and contributes to the development of political stability and regulatory quality. The paper concludes that appropriate initiatives and efficient governance could play a significant role in influencing economic growth in Egypt. This is consistent with previous studies on the impact of institutions on economic growth and development. However, these results need further investigation to determine additional key variables that influence the growth of GDP in Egypt.

We investigate the potential relation between financial openness and financial development for 27 emerging countries for the period between 1996 and 2016. We focus on three dimensions of financial openness: capital account openness, trade openness, and stock-market openness. In this study, we propose alternative measures for capital account and trade openness. Moreover, we offer capital flow and valuation-based measures for stock-market openness as a potential determinant of financial development. Our findings indicate that capital account openness and trade openness are the key drivers of financial development. These results are not sensitive to the use of alternative financial openness and financial development measures, and are robust after being controlled for institutional quality and its components. Our results have implications for policymakers in emerging countries who try to increase the depth of their financial markets for an easier and cheaper access to funds.

The increasing attention of the Government of Egypt, since the 2011 revolution, to achieve sustainable and inclusive growth has given a renewed stimulus to research on economic growth from a sectoral perspective. In this paper, we investigate the main sectors that drive economic growth in Egypt in various time periods by adopting an econometric modelling strategy. In particular, we attempt to answer the following questions: what are the sectors that led economic growth in Egypt during the high-growth period? Were these sectors resilient to shocks? What are therefore the sectors of high priority that policy makers should direct efforts to in order to achieve sustainable inclusive high growth rates? The findings of the regression model reveal a significant role for both the manufacturing and the agriculture sector in promoting economic growth, with a 1% increase in the output of the manufacturing sector being capable of increasing GDP by 0.17%, while, the same increase in the output of the agriculture sector resulting in an increase in GDP by 0.15%.

Financial inclusion has been a major driver of economic growth and a primary strategy for achieving it in the majority of economies globally over the past few years. Most nations have regarded it as a modern program aimed at ensuring equitable and sustainable economic expansion. To this extent, the paper sheds light on the causal relationship between economic growth and financial inclusion in Egypt between 2008 and 2023. The paper aims to address the following question: How do indicators of financial inclusion impact economic growth in Egypt? To address this question, the research aimed to analyse the cause-effect relationship between a set of financial inclusion indicators, including the number of bank accounts, the number of bank payment cards, the number of bank branches, the number of ATMs, the volume of individual deposits, and the value of credit provided to individuals, as well as the economic growth of Egypt according to Gross Domestic Product (GDP). The research employed the Vector Autoregression (VAR) method to investigate the causal relationships among the research variables. The results showed that measures of financial inclusion directly affect Egypt’s economic growth rate. Based on these results, the article recommends enhancing the provision of banking services by streamlining the opening requirements for bank accounts and business licenses, and by improving access to these services across all areas of the Arab Republic of Egypt.

This study aims to investigate the effect of good corporate governance (GCG) on corporate sustainability performance (CSP) using the Triple Bottom Line (TBL) approach in a two-tier GCG system. GCG is measured by the size and education background of board of commissioners (BoC) and top management team (TMT). CSP consists of economic, social, and environment sustainability performance. As many as 117 sample data were collected from the financial statements, annual reports and sustainability reports of non-financial companies listed on the Indonesia Stock Exchange (IDX) for the period of 2013–2017. Multiple regression analysis was employed to test the hypotheses studied with the following results. First, BoC education has a negative effect on economic and environmental sustainability performance and no effect on social sustainability performance. Second, BoC size has a positive effect on economic sustainability performance, a negative effect on social sustainability performance and no effect on environmental sustainability performance. Third, CEO's education has a negative effect on economic sustainability performance, and no effect on environmental and social sustainability performance. Fourth, TMT size has a negative effect on economic and environmental sustainability performance and no effect on social sustainability performance. Contributions, limitations and implications of the study are also discussed.

This paper discusses the evolution of the Egyptian banking sector and the main trends in financial development in the Arab Republic of Egypt. The paper examines empirically the relationship between the development of the financial sector and economic growth in Egypt between 1980 and 2016. It draws comparisons based on critical financial indicators between Egypt and selected emerging markets and developing economies, using a new data set of financial development indexes released by the International Monetary Fund. Econometric time-series modeling of bivariate regressions for real growth per capita and measures of financial development, to assess the relationship between financial development and economic growth in Egypt, yields three specific findings. First; there is a strong association between real growth per capita and financial development measured. Second; access to and the efficiency of banking services are not associated with real per capita income. Third, the Financial Markets Access Index—which compiles data on market capitalization outside the top 10 largest companies and the number of corporate issuers of debt—indicates that there is a robust association with real per capita gross domestic product. The main policy implications suggest that there should be a stronger focus on promoting a more proactive role for the financial services industry in Egypt. There is an especially critical role for bank financing to support the private sector to maintain an inclusive growth momentum. Further development of the capital market will promote the sustainability of such economic growth.

Previous studies have investigated the relationship between political instability and economic growth separately from the relationship between military expenditure and economic growth. Besides, they did not cover the period after 2011 (i.e. the Arab Spring and its consequences). Therefore, this paper attempts to empirically analyze the long-run and short-run impacts of both political instability and military expenditure on economic growth in Egypt. We estimate the autoregressive distributed lag (ARDL) approach using data on the Egyptian economy over the period 1982–2018. For the robustness of our results, we use the fully modified ordinary least squares (FMOLS) estimator. Results of the ARDL approach indicate a significant negative relationship between political instability and economic growth in both the long-run and short-run. Contrarily, military expenditure has an insignificant impact on economic growth, especially in the long-run. These results are confirmed by the FMOLS estimator. Moreover, the estimated coefficient on the one-period lagged error correction term (ECTt-1) indicates that deviations from the long-run equilibrium relationship are corrected within a year.

This article investigates the combined effects of growth in government expenditure, exports, investment and labour supply on economic growth in Egypt between 1955 and 1996. Using cointegration and error correction models, the article finds a long‐run relationship between the variables, but less evidence of one in the short run. To account for the important policy reforms in 1974 and 1991, dummy variables are added which show the reforms have significantly affected the relationship between government expenditure and growth in a positive direction, but have had a negative effect on exports and growth. This conclusion is further supported by the time‐varying coefficient analysis.

Purpose Our study aimed to verify the role of the digital economy in economic growth in Egypt and the availability of the technological capabilities of the business sector for digital transformation, based on the negative impact of the epidemic on all economic sectors in the world in general and Egypt in particular. Design/methodology/approach This was verified based on the standard Error correction package modeling (VECM) study and analysis using Xlstat 2023 and EViews 10. Findings The results of the study conducted during the period (1996–2022) showed that there is a co-integration relationship in the short and long term between the impact of the digital economy and economic growth. We found a positive, statistically significant relationship between the variables of mobile phone subscriptions and Internet use that had a strong positive effect. At the same time, trade openness hurt economic growth in the short term. In the long run, both mobile phone subscriptions and trade openness had a significant positive effect, and the speed of adjustment toward equilibrium was very severe, estimated at 4.7 years (1/0.21). Research limitations/implications The work is limited to the economies of Egypt, which is part of Africa. We suggest conducting further research on evidence from other emerging and developed economies. Practical implications The results are of great importance to policymakers in Egypt as an African country, as the estimation results were positive between the digital economy and economic growth in the Egyptian economy, and this is consistent with the endogenous growth model of economic growth, which assumes that knowledge is the main driver of economic growth. Social implications The paper documents the importance of the digital economy in boosting economic growth, which impacts social life more than the traditional digital economy, especially in times of crisis. Originality/value Based on the existing literature, this paper identified various research gaps. First, no consensus has been reached on the concept of the digital economy, and its index system is inadequate. While existing literature concentrates on examining the influence of ICT on economic development in terms of the number of Internet users, fixed broadband Internet users and mobile subscribers. These measures cannot adequately capture the broader implications of the digital economy. Furthermore, research has largely investigated the significance of digitalization in economic development and reached ambiguous conclusions.