Financial Development and Economic Growth in Nigeria.- Asymmetric Cointegration and Threshold Analysis
No Thumbnail Available
Date
2020
Authors
Alenoghena, Raymond O.
Saibu, Olufemi Muibi
Adeoye, Babatunde Wasiu
Journal Title
Journal ISSN
Volume Title
Publisher
Forum Scientiae Oeconomia
Abstract
This study examines the nonlinear relationship between financial
development and economic growth in Nigeria, covering the period
from 1980 to 2018, in an effort to explain the direction of linearities
and determine the exact threshold policy points for financial development
variables. The financial development proxies adopted in the
study are broad money and credit to the private sector. While deploying
the nonlinear autoregressive distributed lag (NARDL) approach
to ascertain the asymmetric cointegration status of financial development
and GDP growth, the turning point between the variables
of study is estimated using the threshold regression approach. The
findings from the NARDL analysis show that the relationship between
the financial development variables and economic growth are cointegrated
in the long run and have a U-shaped asymmetrical relationship.
Furthermore, the discrete threshold regression analysis reveals
that while the switching point for broad money is 17.73% of GDP, it is
6.03% of GDP for credit to the private sector. Therefore, whenever the
level of the financial development indicators falls below the estimated
tipping point, there is a drag on the country’s economic growth. The
study recommends the implementation of the financial development
threshold points as the minimum levels by which to achieve positive
effects on the country’s economic growth. A further recommendation
to achieve rapid progress in financial development entails the rapid
monetisation of financial transactions and the expansion of financial
access as well as the strengthening of efficiency and regulation of the
financial markets
Description
Keywords
Financial development, broad money, credit to private sector, economic growth, Nonlinear Autoregressive Distributed Lag (NARDL), Threshold Regression.
Citation
Alenoghena Raymond, M. Olufemi Saibu and B. W. Adeoye (2020), “Financial Development and Economic growth in Nigeria: Asymmetric Cointegration and Threshold Analysis” Forum Scientiae Oeconomia, Volume 8 Number 4(2020). Pp. 43 – 63. Faculty of Applied Sciences of WSB University, Dabrowa Gomicza, Poland