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EFFECTS OF FINANCIAL DEEPENING ON ECONOMIC GROWTH IN KENYA Marlyse
| Content Provider | Semantic Scholar |
|---|---|
| Author | Bakang, Linda Ngo |
| Copyright Year | 2015 |
| Abstract | Various scholars and researchers have recognized that the development of the financial sector has productivity and growth-enhancing effects. In this regard,several policies that increase financial deepening have been nurtured with the aim of improving economic growth both in developed and developing countries. This study sought to investigate the effects of financial deepening on economic growth in the Kenyan banking sector. The study achieves this objective using quarterly time series data from 2000 to 2013. Financial deepening, the independent variable was captured by four alternative indicators: Liquid Liabilities (LL) as ratio to nominal Gross Domestic Product (GDP); Credit to the Private Sector (CPS) as ratio to nominal GDP; Commercial Bank Assets as ratio to commercial bank assets plus Central Bank Assets (CCBA); and Commercial Bank Deposits (CBD) as ratio to nominal GDP. The dependent variable, economic growth, was measured by real GDP. All the variables were integrated at level I (1) and the Johansen Jeluisus cointegration test showed evidence of cointegrating equations between GDP and financial deepening indicators. Four models were estimated to determine the long run and short run effects. The study found that banking sector in Kenya has an important role in the process of economic growth. Specifically, the empirical results reveal that liquid liabilities, credit to the private sector, commercialcentral bank assets and commercial bank deposits have positive and statistically significant effects on GDP. The study recommends therefore to reinforce existing policies that will encourage the public to save more money with commercial banks. Increasing the interest rate paid to depositors on their deposits for example, will incite people to save more. In addition, the study recommends the intensification of financial inclusion policies through increased access and usage of formal banking services while reducing banks transaction costs. This will encourage more people to participate in economic activities, to borrow and invest more. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www.ijbcnet.com/4-7/IJBC-15-4601.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
