Browsing by Subject "Banking development"

Now showing 1 - 2 of 2
  • Thumbnail Image
    Item
    Open Access
    Analysing the Relationship between Banking Development and Economic Growth: Time Series Evidence from Namibia
    (2020) Diergaardt, Colin; Alhassan, Abdul Latif; Mutize, Misheck
    The main objective of this study is to examine the relationship between banking development and economic growth in Namibia. Namibia has eight licenced commercial banks, four of which have been operational prior to the country's independence; Bank Windhoek Limited, First National Bank Namibia Limited, Nedbank Namibia Limited and Standard Bank Namibia Limited (BON, 2018). The other four licenced commercial banks began operating post independence. The banking development indicators employed by this study were broad money to nominal GDP (M2), private sector credit to nominal GDP (PSC), and lending interest rates (INTR). The data used in this study is annual data, covering the period 1991 to 2018, engaging the VAR/VECM framework in order to determine the presence of a long-run and short-run association. In addition, this study engaged the Granger causality methodology in order to determine the casual association between banking development and economic growth. The error correction term equation suggested a long-run relationship between the variables in the VECM, while the results indicated that there are no short run associations amongst the variables. Further, the results of the Granger causality test indicated a bidirectional causality between LNRGDP and LNPSC. In addition, the causality test showed that lags of LNINTR Granger causes LNPSC, which is consistent with the neoclassical theory of interest rate, which pronounces that interest rates are determined by the demand and the supply of loanable funds. Moreover, lags of LNINTR and lags of LNM2 granger causes LNRGDP, which suggest that banking development causes economic growth. The study recommended that the Namibian banks should reform credit policies and decrease the cost of debt in an attempt to avail more credit to the private sector in order to sustain and stimulate economic growth.
  • Thumbnail Image
    Item
    Open Access
    Banks, stock market and economic growth in Botswana: a time series analysis
    (2018) Malebye, Nthabiseng; Chamisa, Edward
    This study examines the relationship between banks, stock market and economic development in Botswana using quarterly data from 1995 to 2016. To find out if there is a link between financial development and economic growth, the three measures of stock market development used are stock market capitalization, total value of shares traded and turnover. For bank-based financial development, the proxy is bank credit to private sector and the measure of economic growth is real gross domestic product (GDP) per capita. To analyse the long run and short run relationships among the variables of interest, this study implements the Autoregressive Distributed Lag (ARDL) cointegration technique and the Granger causality technique to find the direction of causality. The findings indicate that there is a positive short and long run relationship between stock market variables and economic growth when turnover and market capitalization are used as proxies and value traded is significant and negatively related to economic growth. The study found that bank credit to private sector is negatively related to economic growth both in the short and the long run. There is bidirectional causality between stock market financial development and economic growth and no causal relationship between banking financial development and economic growth in Botswana. This study recommends that there should be appropriate reforms to develop the financial sector in Botswana to help promote economic growth. Botswana should also have reforms to promote economic growth to foster stock market financial development. This study also offers a comprehensive and detailed overview of the state of the economy, banking system and the financial markets system of Botswana which can help foreign investors as well as individual and institutional investors in making sound investment decisions.