Is There Any Mediating Effect of Financial Deepening on the Relationship Between Economic Growth and Poverty Levels in the EAC Countries

Abstract

The study examined the mediating role of financial deepening on the relationship between economic growth and poverty levels in East African Community countries. The specific objectives included establishing the effect of economic growth on poverty levels in EAC countries and determining the meditating effect of financial deepening on the relationship between economic growth and poverty levels in EAC countries. The positivism philosophy was adopted throughout the study. The study adopted both comparative and descriptive research designs. The study population was the five countries of EAC countries which included Kenya, Rwanda, Uganda, Burundi, and Tanzania. Annual data for 30 years beginning 1989 to 2018 was gathered for the study purpose. Secondary data, which consisted of annual data, was utilized in the study. The study employed normality, heteroscedasticity, multicollinearity, serial correlation and unit root diagnostic tests. The data was analyzed using both descriptive and inferential statistics with the help of excel and STATA version 14. Feasible Generalised Least Squares (FGLS) panel data regression model was adopted to ascertain the causal effect link between various variables relating to economic growth, financial deepening, and poverty levels in EAC member countries. The tests of hypotheses were examined at 95% confidence level. The study results revealed that economic growth had a significant effect on poverty levels in East African Community countries. The study also revealed that financial deepening has a significant mediating effect on the link between economic growth and poverty levels in East African Community countries.