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Rivers State University, Port Harcourt.
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| Title: | Financial Deepening and Economic Development: A Vector Error Correction Approach from Nigeria |
| Author(s): | OZUZU, CSR. |
| Abstract: | This study examined the effect of financial deepening and Nigeria’s economic development. The objective was to use vector correction model to establish the effect of financial deepening on economic development. Time series data were sourced from Central Bank of Nigeria Statistical bulletin and publications of Nigeria Bureau of Statistics. Per Capita Income index was proxy for dependent variables while market capitalization ratio, percentage of private sector credit to gross domestic product, percentage of broad money supply to gross domestic product and interest rate spread were proxy for independent variables. Ordinary least square methods of co integration, unit root test and Vector error correction model was used in the data analysis. The results in table 4 showed that the error correction terms carry negative signs. The speed of adjustment in the first equation is approximately 71.9 percent per period towards the longrun equilibrium. The study found that 61.6 percent variation in Nigeria per capita income can be traced to variation in financial deepening variables. The beta coefficient of the variables found that market capitalization ratio and credit to private sector have negative effect on per capita income while interest rate spread and broad money supply to gross domestic product have positive but not significant effect on Nigeria’s per capita income. From the findings, the study concludes that financial deepening has significant effect on Nigeria’s economic development. the study recommend that efforts should be made to improve the stock market performance to have a positive effect on the real gross domestic product of Nigeria overtime and reduction in the cost of capital by the Nigerian government. |
| Keywords: | Financial Deepening, Economic Development, A Vector Error Correction Approach, Per Capita Income |
| Journal: | Journal of Contemporary Research in Economics and Development Studies (JCREDS) |
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