Financial sector reforms and economic growth: the West African experience

Abstract

Since the mid-1980s, a good number of West African countries started experimenting with policies of financial sector reforms with a view to increasing prospects for economic growth. However, the empirical evidence on the relationship between financial reforms and growth is still mixed. This study therefore assessed the extent to which economic growth has been influenced by policies of financial reforms in West Africa using panel data. In terms of relative effects, the results from this study indicate that implementing policies that raise financial reforms by 10% induce economic growth by margins of 0.5% and 0.9% in WAEMU and WAMZ countries respectively. For the overall sample of West African countries, the study shows that raising policies of financial reforms by a margin of 10% induce economic growth by approximately 0.6%. Thus, the study found that policies of financial reforms were not uniformly growth-inducing across West African countries.