Finance-institution-growth trilogy: time-series insights from South Africa
International Journal of Emerging Markets
ISSN: 1746-8809
Article publication date: 1 September 2020
Issue publication date: 21 January 2022
Abstract
Purpose
This study examines the moderating effect of institutional quality on the finance-growth nexus in South Africa from 1986 to 2015.
Design/methodology/approach
This study adopts unit root tests, cointegration test and autoregressive distributed lag (ARDL) model.
Findings
The findings reveal that institutional quality constitutes a drain to the growth benefits of financial development (FD) in South Africa in the short-run while FD and institutional quality converge to enhance growth process of the country in the long-run. Also, the threshold of institutional quality beyond which institution stimulates strong positive impact of finance on growth is estimated to be 6.42 on a 10-point scale.
Practical implications
This study, therefore, suggests that institutional quality matters in the way FD influences economic growth in South Africa. Hence, stakeholders are encouraged to trace and block lapses and loopholes in the institutional framework guiding financial system in South Africa so as to maximize growth benefits of FD.
Originality/value
This study contributes to the extant studies by introducing a country-specific analysis into the empirical examination of how institutional quality influences the impact of FD on economic growth. Also, this study deviates from other studies by determining the threshold of institutional quality beyond which FD stimulates strong positive effect on economic growth in South Africa
Keywords
Acknowledgements
The authors are grateful to the anonymous referees of the journal for their extremely useful suggestions to improve the quality of this article. Usual disclaimers applyEthics approval and consent to participate: Not applicable Consent for publication: The permission is explicitly granted Availability of data and material: Data are readily available upon request Competing interests: The authors declare that they have no competing interests. Funding: Not applicable. Authors’ contributions: The work is a joint collaboration of both authors. Author COO initiated the idea, wrote the introduction and did the analysis and discussion of empirical findings as well as conclusion of the paper while author AA contributed his scholarship and expertise in the areas of literature review and research method. All authors have read and approved the manuscript.
Citation
Olaniyi, C.O. and Adedokun, A. (2022), "Finance-institution-growth trilogy: time-series insights from South Africa", International Journal of Emerging Markets, Vol. 17 No. 1, pp. 120-144. https://doi.org/10.1108/IJOEM-05-2019-0370
Publisher
:Emerald Publishing Limited
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