Domestic financial liberalization and economic growth nexus: the role of corruption

Abstract

Purpose

This study aims to examine the effect of domestic financial deregulation on economic growth in five selected sub-Saharan African nation (SSA). The paper also explored the interaction effect of domestic financial deregulation and corruption on growth.

Design/methodology/approach

The paper used Driscoll and Kraay standard errors based on the pooled ordinary least squares, which is robust to heteroskedasticity, cross-sectional dependence and autocorrelation.

Findings

The outcome indicates that domestic financial liberalization has accelerated growth in SSA economies. Similarly, evidence reveals that foreign direct investment and credit to the private sector by banks accelerate growth. However, evidence indicates that labour and capital negate growth. Also, the interaction term for domestic financial liberalization and corruption shows a negative influence on growth. The study, therefore, recommends that well-tailored policy design and strategy be implemented to provide a smooth and conducive business environment for investors.

Originality/value

Numerous studies have analysed the influence of financial deregulation on growth; however, none have examined the effects of domestic financial deregulation on growth in the context of SSA. Also, no studies have explored the interaction effect of domestic financial deregulation and corruption on growth.

Citation

Haruna, A.A. and Abu Bakar, A.S. (2021), "Domestic financial liberalization and economic growth nexus: the role of corruption", Journal of Financial Crime, Vol. 28 No. 4, pp. 1210-1231. https://doi.org/10.1108/JFC-10-2020-0217