Financial Institutions Dynamics, Investments and Development

Abstract

The study evaluates how specific features of financial institutions and investment sources influence enduring development among economies in the sub-region of Sub-Saharan Africa (SSA). Data for the interactions in question were compiled from 36 economies in SSA from 1996 to 2019, and various empirical estimates were carried out using the two-step system Generalized Method of Moments statistical framework. Results from the analyses suggest that growth in depth, improved access, and efficiency of financial institutions foster long-term development among economies in the sub-region. Investments in various forms were found to have a varied augmenting impact on long-term development. Further empirical analyses suggest that quality of governance has a significant positive moderating impact on how net foreign direct investment and domestic investments influence development among economies in the sub-region. Political instability is, however, found to negate gains to development from both investment growth and contributions from financial institutions. JEL Codes: C33, G2, E13