Financial development and growth in sub-Saharan Africa: do legal origin and CFA membership matter?

Abstract

This article examines whether relations between legal origin, financial development and economic growth that hold worldwide hold in British and French legal origin Sub-Saharan Africa (SSA) as well. We also test for the differential impacts on financial development and on growth of Communauté Financière Africaine (CFA) currency union membership within French legal origin SSA. Our panel regressions and descriptive measures agree with the findings of British legal origin advantage with respect to financial development. In addition, financial development contributes positively to economic growth in British legal origin SSA, as it does worldwide. Within French legal origin SSA, we find that currency union constraints tend to hinder financial development in CFA countries beyond the negative impacts of French legal origin. Moreover, contributions to the growth of various indicators of financial development in French legal origin SSA are negative or insignificant irrespective of CFA membership.