The Impact of Financial Deepening on Economic Growth: Evidence from Nigeria

Josaphat Uchechukwu Joe Onwumere · Imo Godwin Ibe · Frank O. Ozoh · Oge Mounanu

24 citations0/0 files storedResearch Journal of Finance and Accounting

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Monetary Policy and Economic Impact Economic Theory and Policy Economic theories and models

Abstract

This paper examined the impact of financial deepening on economic growth in Nigeria. Adopting the supply-leading hypothesis using variables such as broad money velocity, money stock diversification, economic volatility, market capitalization and market liquidity as proxies for financial deepening and gross domestic product growth rate for economic growth, we found that broad money velocity and market liquidity promote economic growth in Nigeria while money stock diversification, economic volatility and market capitalization did not within the period studied (1992-2008). Government policy should therefore be geared towards strategically increasing money supply and promoting efficient capital market that will enhance overall economic efficiency, create and expand liquidity, mobilize savings, enhance capital accumulation, transfer resources from traditional sectors to growth inducing sectors (such as manufacturing and industry, agriculture and the services sectors) and also promote competent entrepreneurial response in various sectors of the economy. Keywords: Financial Deepening, Economic Growth, Supply-leading Hypothesis

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References

2003The Theory of Economic Development 1993Finance and Growth: Schumpeter Might Be Right 2000Financial intermediation and growth: Causality and causes 1974Money and Capital in Economic Development.1993Finance, entrepreneurship and growth 1974Shaw, Edward S., Financial Deepening in Economic Development, New York, Oxford University Press, 1973, xii + 260 pp. ($7.50 cloth, $3.50 paper)1999Stock Markets, Banks, and Economic Growth 1970Financial Structure and Development.

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2015Relevance of Financial Sector Development on Real Sector Productivity: 21st Century Evidence from Nigerian Industrial Sector 2014The quality of institutions and financial development in mena countries: An empirical investigation 2016The Effect of Financial Deepening on Economic Growth in Nigeria (1985 -2014)2016Financial Deepening and Domestic Investment in Nigeria 2020The Impact of Financial Deepening on Economic Growth in Nigeria (1981-2018)2021

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