Effect Of Financial Development On Macro-Economic Variables In Nigeria

Abstract :

There has been a growing body of research that focus on the nexus between developments in Finance and economic growth variables. While some studies sought to establish the causation between the two variables, some others focus on the aspect or extent of development in Finance, or exact variables in Finance that could ignite growth in the economic sector. Yet some others examine those macro-economic variables, which financial development could ignite their performance. Undoubtedly, the quest to proffer logical answer to the fundamental economic growth question on why countries grow at different rates has undoubtedly digressed researchers to further investigate the causal factors of influence on statistical measures of financial development and economic growth variables. Moreover, dearth of literature on the nexus that exists between macro-economic variables and financial development in Nigeria necessitated this study. The paper aim at finding the impact of financial development on macro-economic variables in Nigeria. The study examines the long-run effects and two potential causal variables of influence on economic growth; using Vector Error Correction Model. It is found that the growth effect of financial development is sensitive to the choice of macro-economic variable. The results suggest that the effects of financial development on macro-economic variables depend on the measures used to proxy for financial development.