Abstract |
This paper, firstly, takes advantage of the principal component analysis
to build a synthetic financial development indicator for every state member of
the West Africa Economic and Monetary Union (WAEMU). Secondly, it examines
empirically the link between financial development and economic growth, on the one
hand, and the link between financial development and sectoral activities, on
the other hand, over the period 1961-2005. To this end, it performs
cointegration and Granger causality tests. The results show the existence of a
stable long-run relationship between financial development and economic growth
in WAEMU countries. The causality is either unidirectional, running from
finance to economic growth, in 3 countries out of 8, and in 5 countries out of
8 the causality is bidirectional. Furthermore, at a sectoral level, results
reveal some cases of unidirectional causality, running from finance to economic
sector activities, and some cases of bidirectional causality. However, there
are many cases of non-cointegration and non-causality between financial development
and the agricultural sector. This may suggest that the financial sector does
not drain sufficient amount of fund to the agricultural sector in order to
favour its development.
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