Preprint Article Version 1 This version is not peer-reviewed

Non-Linear Relationship between Financial Development, Economic Growth and Growth Volatility: Evidence from Nigeria

Version 1 : Received: 4 July 2018 / Approved: 5 July 2018 / Online: 5 July 2018 (08:39:38 CEST)

How to cite: Oro, O.U.; Alagidede, P. Non-Linear Relationship between Financial Development, Economic Growth and Growth Volatility: Evidence from Nigeria. Preprints 2018, 2018070087 (doi: 10.20944/preprints201807.0087.v1). Oro, O.U.; Alagidede, P. Non-Linear Relationship between Financial Development, Economic Growth and Growth Volatility: Evidence from Nigeria. Preprints 2018, 2018070087 (doi: 10.20944/preprints201807.0087.v1).

Abstract

The relationship between economic growth, growth volatility and financial sector development continues to attract attention in the theoretical and empirical literature. Over time, some studies hypothesize that finance has a causal linear relationship with growth. Recently several other authors contradict this claim and argue that the relationship that exists between finance and growth is nonlinear. We investigate these claims for Nigeria for the period between 1970 and 2015, using semi-parametric econometric methods, Hansen sample splitting techniques and threshold estimator. We observed no evidence of ‘Too much finance’ as claimed by many researchers in recent times. We show that the relationship between financial development and economic growth is U-shaped. This is equally true for the relationship between financial development and growth volatility. We also discuss policy implications of our findings and recommend financial innovations and decentralization of stock exchanges to boost access to financial services, in addition, improved regulation to enhance financial market efficiency.

Subject Areas

Nigeria; financial development; economic growth; threshold regression; time series

Comments (0)

We encourage comments and feedback from a broad range of readers. See criteria for comments and our diversity statement.

Leave a public comment
Send a private comment to the author(s)
Views 0
Downloads 0
Comments 0
Metrics 0


×
Alerts
Notify me about updates to this article or when a peer-reviewed version is published.