Economy, Institutions, and Financial Sector Growth in ECOWAS Member States

Abstract

The majority of research that have explored the association between financial development and economic growth in the ECOWAS area, taking into consideration the roles that were described earlier, have shown that the influence of institutional quality on economic growth continues to be a topic of continuous dispute. In this study, two-step SYS GMM (SGMM) estimators were utilized in order to conduct an analysis on the data pertaining to fifteen emerging economies that are members of the Economic Community of West African States (ECOWAS). 1996 to 2017 were the years that were covered by the analysis. The conclusions of the study are as follows: originally, the development of financial products and services in the ECOWAS area did not have a major and favorable influence on the expansion of the domestic economy. Additionally, it is important to note that two indices of institutional quality—control of corruption and regulatory quality—decrease growth, although control of corruption has a beneficial influence on growth. This is something that should be taken into consideration. As stated previously, the facts demonstrate that the development of capital has a positive correlation with growth, but the participation of the labor force has a negative impact on growth. An expansion of the economy is ultimately prevented by the failure to tackle corruption in the region as well as the inadequate development of the banking sector.

Keywords: Economy, Institutions, Financial Sector Growth.