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Financial Ma ke In eg a ion and Economic
G ow h: An Expe ience om Nige ia
Oyeni an Ishola Wasiu
1
Depa men o Economics, Al-Hikmah Uni e si y, Ilo in, Nige ia
Ma yam Wahab Temi ope
Depa men o Economics, Al-Hikmah Uni e si y, Ilo in, Nige ia
Abs ac
This s udy examines he e ec o inancial in eg a ion on economic g ow h
in Nige ia. Using ime se ies da a om 1981 and 2012, he s udy employs
au o eg essi e dis ibu ed lag (ARDL) bounds es ing app oach p oposed by
Pesa an e al., (2001) o es ima e he long un and sho un e ec o inancial
in eg a ion and de elopmen on economic g ow h. The esul om coin eg a ion
es showed p esence o long un ela ionship be ween dependen and all
explana o y a iables. The eg ession esul s show ha , while inancial
in eg a ion has no sho un e ec on economic g ow h, i s long un e ec on
g ow h is nega i e and signi ican . Financial de elopmen was ound o ha e
bo h sho un and long un posi i e e ec on economic g ow h in Nige ia.
Hence, o Nige ia o bene i om inancial in eg a ion, he go e nmen has o
inc ease he le el o compe i ion, imp o e he quali y o inancial in o ma ion
and educe co up ion in he inancial sys em.
Keywo ds: In eg a ion, libe aliza ion, uni oo , Au o eg essi e, economic
g ow h
Ci e his a icle: Wasiu, O. I., & Temi ope, M. W. (2015). Financial Ma ke In eg a ion and
Economic G ow h: An Expe ience om Nige ia. In e na ional Jou nal o Managemen ,
Accoun ing and Economics, 2(7), 656-668.
In oduc ion
The ad ancemen in in o ma ion and communica ion echnology coupled wi h
g owing inancial de egula ion and libe aliza ion in in e na ional capi al ma ke s has
made inancial ma ke s h oughou he wo ld s eadily become mo e open o o eign
in es o s. This de elopmen has also made a numbe o coun ies, including Nige ia,
ini ia e e o ms o os e inancial ma ke de elopmen and a ac o eign po olio lows.
1
Co esponding au ho ’s email: [email protected]
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One o he mos endu ing deba es in inance du ing he las decade is whe he inancial
ma ke in eg a ion causes economic g ow h. This issue had been widely s udied by
schola s (see Akdogan, 1995; Le ine, 2001; Emi is, 2002; Klein and Oli ei, 2006;
A manious, 2007). Financial ma ke in eg a ion is belie ed o a ec he eal economy
h ough a leas wo b oad channels: Fi s , he size o he inancial sec o and he olume
o a ailable c edi a e seen as a p oxy indica o o how e ec i ely he sec o manages o
collec sa ings and alloca e hem o p oduc i e in es men s. This ans e o unds no
only aises p oduc i e capaci y bu should also enhance he e iciency o he economy by
ealloca ing unds om leas o mos p oduc i e in es men s. A second channel ela es o
he capaci y o he inancial sec o o abso b shocks. An e ec i e inancial sec o will
aise he possibili ies o households and en e p ises o hedge agains isks and sys emic
shocks (Bloch and Tang, 2003).
No wi hs anding hese heo e ical bene i s o inancial in eg a ion o end g ow h and
inequali y, empi ical s udies ha e so a p oduced mixed e idence, pa icula ly ega ding
he impac o inancial ma ke in eg a ion on inancial de elopmen and economic g ow h
in de eloping coun ies. The dismal condi ion o he inancial sys em in he de eloping
coun ies pos inancial globaliza ion has also ecei ed a g ea a en ion globally since he
las qua e o 20 h cen u y. Au ho s such as Rod ik (1998) and S igli z (2002) a gue ha
inancial in eg a ion has emained a cu se o de eloping coun ies since i is a majo cause
o inancial c ises. Howe e , Mishkin (2005) con ends ha inancial in eg a ion p omo es
g ow h bu i is he bad policies o hese de eloping coun ies ha hinde he p omo ional
e ec o inancial globaliza ion. I was also con ended ha inancial ma ke in eg a ion
en ails se e al isks in e ms o capi al ligh which could lead o balance o paymen
disequilib ium h ough cu ency luc ua ions and high in la ion a es which engende
cu en accoun de ici and unemploymen (Boyle, 2009).
Se e al easons ha e been pu o wa d as he causes o lack o signi ican impac o
inancial ma ke in eg a ion and inancial de elopmen on economic g ow h in
de eloping coun ies. Acco ding o S ulz (2005), inancial ma ke in eg a ion emain
ine ec i e in de eloping coun ies due o lack o s ong p ope y igh s, weak legal
sys em, co up ion, lack o quali y inancial in o ma ion, poo co po a e go e nance, and
go e nmen o e bea ing in e e ence wi h he inancial sec o . Also, in a inancially
ep essed economy such as in de eloping economies, has also hinde ed he success o
capi al ma ke in eg a ion. Al hough, mos o hese de eloping coun ies libe alized hei
inancial sec o , he e a e s ill some elemen s o inancial ep ession in hei inancial
sec o . Fo ins ance in Nige ia, ha ing libe alized he inancial sec o in 1986,
go e nmen s ill in e ened in he de e mina ion o exchange a e. The cen al bank was
con olled by he go e nmen especially du ing he mili a y egime. Some banks ha e he
majo i y o he deposi s om ede al, s a e o local go e nmen and i s pa as a als (Nnana,
2001).
In summa y, pa o he di icul y in inding a de ini e ela ionship be ween inancial
ma ke in eg a ion and g ow h may lie in he ac ha inancial ma ke openness in e ac s
wi h he o e all egula o y en i onmen in any pa icula coun y. A suppo ing business
en i onmen wi h e icien go e nance, p oduc i e indus ial ela ions and p edic able
labou egula ion helps o eign in es o s o iden i y business oppo uni ies quickly and
channel unds owa ds hei mos p oduc i e use.
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Capi al ma ke in eg a ion could be made e ec i e i de eloping coun ies could
de elop s ong p ope y igh s, s eng hen he legal sys em, educe co up ion, imp o e
he quali y o inancial in o ma ion, imp o e co po a e go e nance, and ge he
go e nmen ou o he business o di ec ing c edi .
To ou knowledge, he e is pauci y o s udies on he e ec o inancial ma ke
in eg a ion on economic g ow h in Nige ia. Mos o he wo ks in his a ea ocus on he
impo ance o inancial ma ke de elopmen . This s udy, he e o e, ills his gap by
empi ically p o iding e idence o he e ec o inancial ma ke in eg a ion on economic
g ow h in Nige ia be ween 1981 and 2012.
Concep o inancial in eg a ion
The concep o inancial in eg a ion has been pe cei ed di e en ly by a ious au ho s.
Financial in eg a ion is said o encompass domes ic inancial ma ke de egula ion and
capi al accoun libe aliza ion (McKinnon, 1973). Financial in eg a ion is de ined as he
in eg a ion o a coun y’s local inancial sys em wi h in e na ional inancial ma ke s. I
usually equi es libe aliza ion o domes ic inancial sec o and he capi al accoun .
Financial in eg a ion, hus, en ails inc ease in c oss-coun y capi al mo emen , which
in ol es an ac i e pa icipa ion o local bo owe s and lende s in in e na ional ma ke s
and a widesp ead use o in e na ional inancial in e media ies and ins umen s (Bussie e,
2004).
Emi is (2002) a gues ha asse s wi h simila isk cha ac e is ics will ha e he same
p ice i inancial ma ke s in he wo ld a e comple ely in eg a ed e en i hese asse s a e
aded on di e en ma ke s. To him, “in comple ely in eg a ed inancial ma ke s,
in es o s ace common and coun y-speci ic o idiosync a ic isk, bu p ice only common
isk ac o s, because coun y-speci ic isk is ully di e si iable. When ma ke s a e
pa ially in eg a ed, in es o s ace bo h common and idiosync a ic isks and p ice hem
bo h. Howe e , i ma ke s a e comple ely segmen ed, in es o s ace and p ice only
coun y-speci ic sou ces o isk”.
Theo e ically, inancial in eg a ion p omo es de elopmen o he inancial sys em and
economic g ow h (McKinnon and Pill, 1997). Financial in eg a ion ad ances he wo king
o he inancial sys em h ough wo main channels: i s , inancial in eg a ion inc eases
he lows o unds and enhances inancial in as uc u e h ough educed asymme ic
in o ma ion which, consequen ly, dec eases ad e se selec ion and mo al haza d and
enhances he a ailabili y o c edi (Uni e and Sulli an, 2003 and Mishkin, 2006).
Secondly, inancial in eg a ion leads o mo e comp ehensi e, s able, and e ec i e
inancial ma ke s and, as a esul , inc eases economic g ow h and de elopmen (Le ine,
2001).
Financial in eg a ion imp o es mac oeconomic policy-making and encou age he
implemen a ion o p o-g ow h e o ms by imposing discipline on go e nmen s
(Goldbe g, 2004), s eng hens co po a e go e nance h ough a mo e compe i i e ma ke
o co po a e con ol (Uni e and Sulli an, 2003 and Goldbe g, 2004); imp o es coun y
isk-sha ing (Boyle, 2009), enhances p oduc ma ke compe i ion h ough he in low o
new, in e na ionally ope a ing en e p ise and po olio di e si ica ion (A manious, 2007
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659
and Boyle, 2009) and di ec s capi al lows o he mos e icien and p oduc i e use and
ensu e ha execu i es a e pe o ming a hei bes (Akdogan, 1995; and Mishkin, 2003).
Th ough inancial in eg a ion, o eign inancial ins i u ions b ing o domes ic inancial
ma ke s bes co po a e p ac ices and expe iences ha which a e likely o encou age
echnology ans e o domes ic inancial ins i u ions (Goldbe g, 2004). En y o o eign
inancial ins i u ions helps imp o e domes ic p uden ial supe ision because supe iso s
a e now able o see wha isk managemen p ac ices a e success ully used in o eign
ins i u ions and insis ha hey be adop ed by domes ic ins i u ions (Mishkin, 2003).
Howe e , despi e i s no able ad an ages, inancial in eg a ion has been claimed o
expose a coun y o capi al ligh and inancial c isis and inancial malp ac ices (Boyle,
2009). Rogo e al., (2006) no e ha inancial ma ke in eg a ion can heigh en a coun y’s
ulne abili y o mac oeconomic ins abili y and inancial c isis i a coun y’s inancial
ma ke is impe ec . The impe ec ions in inancial ma ke can gene a e specula i e
a acks bubbles, and he ding beha io among o he s. Impe ec ions in in e na ional
inancial ma ke s may also lead o inancial c ises e en in coun ies wi h sound
undamen als. I was also poin ed ou ha inadequa e inancial in as uc u e du ing he
p ocess o in eg a ion can weaken he heal h o he local inancial ma ke and inc ease i s
ulne abili y (Obs eld, 1998; Demi guc-kun and De agiache 1999 and Lane and
Mislesi- e e i 2006).
Hence, o coun ies o bene i om inancial in eg a ion, Mishkin (2006) poin s ou
some p e equisi es which include: de eloping s ong p ope y igh s, s eng hening he
legal sys em, educing co up ion, imp o ing he quali y o inancial in o ma ion,
imp o ing co po a e go e nance, and ge ing he go e nmen ou o he business o
di ec ing c edi .
Empi ical e iew on he e ec o inancial in eg a ion on economic g ow h
Li e a u es abound on he ole and impo ance o inancial ma ke in eg a ion in
economic de elopmen . Bekae e al., (2005) using a sample ha co e s 95 coun ies
o e he pe iod 1980–97, conclude ha inancial ma ke in eg a ion inc eases GDP
g ow h by abou 1 pe cen age poin . Using a longe sample wi h di e en me hodology,
Li (2003) inds ha such in eg a ions lead o a 0.6 pe cen age inc ease in GDP g ow h.
Hammel (2006) e eals ha indus ies ha a e mo e dependen on ex e nal inance g ow
as e in coun ies wi h ela i ely highe s ock ma ke capi aliza ion a es.
Chinn and I o (2005) ocus on he links be ween inancial ma ke in eg a ion, legal and
ins i u ional de elopmen , and inancial de elopmen . In hei panel da a analysis
encompassing 108 coun ies and ime span om 1980 o 2000, hey ound ha a highe
le el o inancial in eg a ion con ibu es o he de elopmen o s ock ma ke s only i a
h eshold le el o gene al legal sys ems and ins i u ions is a ained and ha ade openness
is a p econdi ion o inancial ma ke in eg a ion. They also ound ha in de eloping
economies a highe le el o ins i u ional amewo k, e ec i e law and o de , as well as
he lowe le els o inancial co up ion inc ease he impac o inancial in eg a ion on he
de elopmen o s ock ma ke s”.
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660
Klein and Oli ei (2001) examine a c oss-sec ion o 87 indus ialized and less
de eloped coun ies be ween 1976 and 1995. In hei s udy, inancial in eg a ion was
p oxied by capi al accoun . They ound a posi i e ela ionship be ween capi al accoun
libe aliza ion and inancial de elopmen . Howe e , he iden i ied posi i e ela ionship is
only associa ed en i ely wi h de eloped coun ies, while he e is no de ec able
ela ionship be ween inancial in eg a ion and de elopmen o he less de eloped
coun ies
Using i m-le el da a in a sample o 11 eme ging ma ke coun ies, Cha i and Hen y
(2005) ind ha inancial ma ke in eg a ion educe he cos o capi al and inc ease
in es men . They also ind ha inancial in eg a ion educes he sys ema ic isk associa ed
wi h holding equi ies in de eloping coun ies. Using a sample o 12 de eloping coun ies
and an e en s udy app oach, Hen y (2000) shows ha , on a e age, equi y p ice indexes
egis e a subs an ial inc ease in he mon hs p eceding capi al ma ke libe aliza ions,
implying ha hese libe aliza ions a e associa ed wi h a all in he cos o equi y capi al.
Also, using indus y-le el panel da a om he manu ac u ing sec o s o 31 eme ging
ma ke economies o e he pe iod 1981– 98, Gup a and Yuan (2005) conclude ha , in
capi ally in eg a ed economies, indus ies ha a e echnologically mo e dependen on
ex e nal inance expe ience highe g ow h.
In o he s udies, Le ine and Ze os (1998) ind ha inancial in eg a ion and liquidi y
a es in s ock ma ke s a e posi i e and signi ican ly co ela ed wi h p esen and u u e
a es o economic g ow h, capi al accumula ion and an inc ease o p oduc i i y g ow h.
Mil on (2006) inds ha i ms wi h s ocks ha a e open o o eign in es o s egis e highe
le els o e u ns on in es men , highe e iciency and lowe le e age a ios. Al a o and
Hammel (2006) ind ha inancial ma ke in eg a ion boos impo s o machine y going
in o domes ic equipmen in es men . Edison e al., (2004) con i med he posi i e
associa ion be ween inancial ma ke in eg a ion and ou pu g ow h bu hey ind ha his
ela ionship disappea s when a measu e o go e nmen epu a ion was in oduced as a
eg esso .
Model speci ica ion
The ansmission mechanism om inancial in e media ion o economic g ow h is an
open ques ion in he li e a u e. In his s udy, he neoclassical g ow h model was employed
o build a model ha gi es inancial ma ke a ole in economic g ow h. The s anda d
neoclassical g ow h model seeks o explain he g ow h a e o agg ega e ou pu om
a ious ac o s, such as labou , capi a and echnological p og ess also known as he Solow
esidual. The s anda d neoclassical model ela ing hese ac o s o ou pu is gi en as
ollows:
Y( ) = A( ) [ K( ), L( ) ] (1)
whe e Y( ) ep esen s ou pu in ime ( ), K( ) capi al inpu in ime ( ) and L( ) labo
inpu in ime ( ). A( ) deno es he echnology le el in he economy o i s s ock o
knowledge and o al ac o p oduc i i y.
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Gi en he signi icance o echnological ac o s in economic g ow h, measu es o
inancial de elopmen and in eg a ion we e in oduced in o equa ion (1) o cap u e he
e ec o echnological change on economic g ow h. Since, acco ding o Schumpe e
(1911), well- unc ioning inancial sys em boos s echnological inno a ion by unding
en ep eneu s wi h he bes chances o success ul inno a ion and echnological
b eak h ough. Exchange a e and in e es a e we e also in oduced in o equa ion (1) o
se e as con ol a iables.
Hence, based on he a gumen abo e, equa ion is ew i en as ollows;
Y = α0 + α1K + α2L + α3FIN + α4CI + α5EXR + α6INT + µ (2)
Whe e:
Y= log o indus ial alue added
FIN= measu e o inancial deepening ( a io o money supply (M2) o GDP)
CI= measu e o Financial in eg a ion
EXR= exchange a e
INT= in e es a e
K= log o capi al
L= log o labou o ce
αi and µ a e pa ame e s and e o e m espec i ely.
Da a sou ce and measu emen
Seconda y da a a e used o his s udy spanning 1981 o 2012. All a iables a e
sou ced om Cen al Bank s a is ical bulle in 2013. Financial in eg a ion is ep esen ed
by a io o capi al accoun o GDP (Glick e al., 2004 and He nán, 2007). Financial
de elopmen is ep esen ed by a io o b oad money supply o GDP. Capi al and labou
a e cap u ed by g oss ixed capi al o ma ion and o al labou o ce espec i ely. In e es
a e and exchange a e a e ep esen ed by lending a e and e ec i e US o nai a exchange
a e. Income is ep esen ed by indus ial alue added ins ead o GDP since i is used in
he compu a ion o inancial de elopmen and inancial in eg a ion.
Me hod o Analysis
Empi ically es ima ing he long- un and sho - un impac o inancial in eg a ion on
economic g ow h in Nige ia, equa ion (2) was es ima ed using he bounds es ing (o
au o eg essi e dis ibu ed lag (ARDL)) coin eg a ion p ocedu e, de eloped by Pesa an e
al.,(2001). The ARDL p ocedu e can be used when he eg esso s a e in eg a ed o o de
ze o o one unlike he s ic equi emen o Johansen app oach which equi ed all
a iables o be pu ely in eg a ed o o de one, ha is, s a iona y a i s di e ence (Fosu
and Magnus, 2006). The ARDL p ocedu e is also ela i ely mo e e icien in small o
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ini e sample da a sizes as is he case in his s udy (Kaka e al., 2010). The ARDL,
howe e , is no e icien in he p esence o a iables ha a e s a iona y a second
di e ence.
The ARDL coin eg a ion p ocedu e in ol es se e al s ages. In he i s s age, he
s a iona y p ope ies o ime se ies a iables in equa ion (2) we e examined by
implemen ing uni oo es . All a iables we e es ed in le els and in he i s di e ence
using he Augmen ed Dickey-Fulle (ADF) Tes and Phillip Pe on uni oo es .
The second s age in ol es es ing o he exis ence o a long- un ela ionship be ween
economic g ow h, inancial in eg a ion and all o he eg esso s wi hin a uni a ia e
amewo k. Following Pesa an e al., (2001), he bounds es p ocedu e was adop ed by
modeling he long- un o equa ion 3 as a gene al ec o au o eg essi e (VAR) model o
o de p as ollows:
∆Y = C0+ β1Y -1 +β2K -1 + β3L -1+ β4FIN -1+ β5CI -1 + β6EXR -1 + β7INT -1 +
∑𝜙
𝑝
𝑖=1 1∆Y -1 + ∑𝜙
𝑝
𝑖=1 2∆K -1 + ∑𝜙
𝑝
𝑖=1 3∆L -1 + ∑𝜙
𝑝
𝑖=1 4∆FIN -1 + ∑𝜙
𝑝
𝑖=1 5∆CI -1
+∑𝜙
𝑝
𝑖=1 6∆EXR -1 +∑𝜙
𝑝
𝑖=1 7 ∆INT -1 + μ (3)
whe e βi and ϕ a e he long un and sho - un mul iplie s espec i ely, C0 is he d i
and μ a e whi e noise e o s.
In ARDL p ocedu e, equa ion (3) is es ima ed by o dina y leas squa es (OLS) in o de
o es o he exis ence o coin eg a ion o long- un ela ion among he a iables by
conduc ing an F- es o he join signi icance o he coe icien s o he lagged le els o
he a iables, i.e
H0: β1= β2 = β3 =β4= β5 = β6 = β7 = 0 (The e exis no long un ela ionship)
H1: β1≠ β2 ≠ β3 ≠ β4 ≠ β5 ≠ β6 ≠ β7≠ 0
The calcula ed F-s a is ic om equa ion (3) is compa ed wi h he c i ical alue
abula ed by Pesa an e al., (2001). I he calcula ed F-s a is ic exceeds he uppe c i ical
alue, he null hypo hesis o no long- un ela ionship can be ejec ed ega dless o
whe he he unde playing o de o in eg a ion o he a iables is ze o o one (Pesa an e
al,. 2001).
Once coin eg a ion is es ablished he condi ional ARDL (p1, q1, q2, q3, q4, q5, q6) long-
un model o equa ion (2) can be es ima ed as:
Y = C0+∑𝛽
𝑝
𝑖=1 1Y -1 + ∑𝛽
𝑞1
𝑖=0 2K -1+ ∑𝛽
𝑞2
𝑖=0 3L -1 + ∑𝛽
𝑞3
𝑖=0 4FIN -1 + ∑𝛽
𝑞4
𝑖=0 5CI -1
+∑𝛽
𝑞5
𝑖=0 6EXR -1 +∑𝛽
𝑞5
𝑖=0 7INT -1 + μ (4)
Whe e, all a iables a e as p e iously de ined. This in ol es selec ing he o de s o
he ARDL (p1, q1, q2, q3, q4, q5) model in he six a iables using Akaike in o ma ion
c i e ia (AIC).
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663
The las and inal s ep o an ARDL bound p ocedu e is o ob ain he sho - un dynamic
pa ame e s by es ima ing an e o co ec ion model associa ed wi h he long- un
es ima es. This is speci ied as ollows:
∆Y =λ0+ ∑𝜙
𝑝
𝑖=1 1∆Y -1 + ∑𝜙
𝑝
𝑖=1 2∆K -1 + ∑𝜙
𝑝
𝑖=1 3∆L -1 + ∑𝜙
𝑝
𝑖=1 4∆FIN -1 +
∑𝜙
𝑝
𝑖=1 5∆CI -1 +∑𝜙
𝑝
𝑖=1 6∆EXR -1 +∑𝜙
𝑝
𝑖=1 7 ∆INT -1 + δ8ECM-1 + μ (5)
Whe e ϕ is sho – un dynamic coe icien s o he model, δ indica es he speed o he
adjus men which es o es equilib ium in he dynamic model.
Empi ical esul
In his sec ion, he impac o inancial in eg a ion on economic g ow h is es ima ed
using he Au o eg essi e Dis ibu ed lag model (ARDL) o e he pe iod 1981 o 2012.
Be o e p oceeding o he ARDL bounds es , uni oo es o he ime se ies a iables
used in his s udy we e conduc ed and he esul p esen ed in Table 1. This was o ensu e
ha he a iables in ou model a e no I(2), ha is, no s a iona y a second di e ence, so
as o a oid spu ious esul s. Acco ding o Oua a a (2004) in he p esence o I(2) a iables
he compu ed F-s a is ics p o ided by ARDL p ocedu e a e no alid because he bounds
es is based on he assump ion ha he a iables a e I(0) o I(1).
Table 1 Uni oo es s
Va iable
Augmen ed Dickey Fulle Tes
Phillip Pe on Tes
Le el
Fi s di e ence
le el
Fi s di e ence
Y
-3.640315*
-5.087816**
-3.640315*
-5.102278**
K
-3.775140*
-3.777678*
-3.596300*
-3.571732*
L
-3.673604*
-13.16627**
-4.650099**
-12.41712**
FIN
-0.013920
-4.496688**
-0.080887
-4.388133**
CI
-3.952330**
-8.236770**
-3.952330**
-11.68681**
EXR
-2.090197
-5.306837**
-2.090197
-5.306770**
INT
-3.011616*
-5.509372**
-2.942210*
-8.901823**
No es: * *and * deno e signi icance a 1% and 5%, espec i ely.
The ADF and PP uni oo es s esul s o he a iables a e epo ed in Table 1. In he
esul s, all a iables a e in eg a ed o I(0) based on Phillip Pe on es and Augmen ed
Dickey Fulle es excep o inancial de elopmen and exchange a e bo h o which a e
s a iona y a i s di e ence. These esul s, he eby, jus i y he use o ARDL me hod.
Bounds es s o coin eg a ion
The esul s o bounds es ing app oach o co-in eg a ion long un ela ionship o
equa ion 2 is p esen ed in able 2. The calcula ed F-s a is ic o he model is s a is ically
signi ican , implying ha he null hypo hesis o no co-in eg a ion canno be accep ed and,
hus, i is concluded ha he e is indeed a co-in eg a ion ela ionship among he a iables
used.
In e na ional Jou nal o Managemen , Accoun ing and Economics
Vol. 2, No. 7, July, 2015
ISSN 2383-2126 (Online)
© IJMAE, All Righ s Rese ed www.ijmae.com
664
Table 2: Coin eg a ion es
Dependen
AIC lag
F-s a is ic
P ob.
Ou come a .
Y
1
3.827123
0.0000
he e is coin eg a ion
Ha ing ound he exis ence o long un ela ionship be ween inancial in eg a ion,
economic g ow h and o he selec ed a iables, he ARDL me hod was applied o es ima e
he long un pa ame e s o equa ion 2. Table 3 p esen s he es ima ed long- un coe icien s
o equa ion 2. The lag leng h o long un model was selec ed on basis o Akaike In o
C i e ia (AIC). The R-squa ed and adjus ed R squa ed o he model a e abou 0.97,
signi ying ha abou 97 pe cen o a ia ions in economic g ow h is explained by all he
included independen a iables. The F-s a is ic alue o he long- un model is also
signi ican and implies ha all he independen s a iables include in he model a e join ly
signi ican . The Du bin Wa son es s a is ic shows an absence o au oco ela ion in he
model.
Table 3: Es ima ed long un coe icien s using he ARDL app oach
Dependen a iable: Y
Independen a iables
Coe icien
T- a io (p ob.)
Y(-1)
0.410166
2.709615 (0.0125)
K(-1)
0.069242
3.121440 (0.0019)
L (-1)
0.108862
0.632642 (0.5332)
FIN (-1)
0.011826
2.765668 (0.0095)
C1 (-1)
-0.007955
-3.597233 (0.0003)
EXR (-1)
0.001365
2.449363 (0.0223)
INT (-1)
-0.000640
-0.126792 (0.9002)
R2
0.977884
Adjus ed R2
0.971153
F-s a is ics (P- alue)
145.2835 (0.0000)
DW
2.157172
The long- un esul shows ha pas income le el, capi al in es men , inancial
de elopmen and exchange a e ha e signi ican posi i e e ec on economic g ow h in
Nige ia, while economic labou o ce and in e es a e ha e an insigni ican e ec on
economic g ow h in he long un. In he esul , inancial in eg a ion has a signi ican
nega i e e ec on Nige ia. The implica ion o his inding is ha he Nige ian economy
has been hinde ed by inancial ma ke in eg a ion. This is expec ed since he coun y’s
inancial sys em is s ill unde de eloped ela i ely o he wo ld s anda d. The capi al
accoun has been nega i e o mos he pe iods unde e iew which indica es ha capi al
ligh ou he coun y is s ill subs an ial.
Howe e , inancial de elopmen , measu ed as a io o b oad money supply o GDP,
has a signi ican posi i e impac on Nige ian economy. This esul implies inancial
in e media ion acili a es inc eased economic ac i i ies. This inding is consis en wi h
ha o McKinnon (1973), Nnana (2001) and He nán (2007).
