Financial Development and Integration, Exchange Rate Regimes, and Economic Growth: New Evidence from African Economies

Abstract

This paper examines empirically the extent to which financial development, financial integration and exchange rate regime (ERR) altogether influence positively economic growth in Africa. To achieve this, we build two baseline panel data samples of African countries and new expanded datasets spanning 1980-2015 using a small sample adjusted Generalized Method of Moments (GMM) estimator. To check the robustness of our results, we build two other panel samples by adding on the two previous panel data samples, data from emerging and developed countries and repeat the analysis. The results from the estimations suggest that financial development and financial integration influence positively and significantly economic growth, whereas exchange rate regime has no significant effect on economic performance, controlling for the usual growth- regression variables like trade openness, human capital, investment, governance and the lagged value of per capita GDP.