FINANCIAL REFORMS AND CREDIT GROWTH NEXUS ON INCOME INEQUALITY IN SELECTED SUB-SAHARAN AFRICAN COUNTRIES
- Project Research
- 1-5 Chapters
- Abstract : Available
- Table of Content: Available
- Reference Style: APA
- Recommended for : Student Researchers
- NGN 3000
ABSTRACT
Income inequality stalls economic growth with undesirable socio-economic consequences. Despite measures targeted towards reducing the inequality gap, disparities in income distribution persists. The link between financial reforms and income inequality is still relatively unexplored in the literature. This study appraises the impact of financial reforms including credit growth on income inequality using a sample of twenty selected countries in Sub-Saharan Africa (SSA) from 1980 to 2015. The broad objective is to assess the financial reforms and credit growth nexus on income inequality and establish if the reform-credit-inequality nexus exists. To achieve this, the analytical structure is designed to (1) observe the state of the financial system after the reform, (2) evaluate if credit growth is stimulated by financial reforms and (3) if credit growth has an equalising effect on income inequality. This analytical approach (general-to-specific) is conducted on the broad sample, the four sub-regions (Central, East, Southern and West Africa) and four representative countries (Cameroon, Kenya, Nigeria and South Africa). Five estimation techniques pooled ordinary least squares (OLS), fixed effects (FE), dynamic fixed effects (DFE), system generalised method of moments (sys-GMM) and error correction model (ECM)) are used in evaluating these interactive relationships. In line with the theoretical and empirical literature, the real interest rate, deposit rate, domestic credit to the private sector and the Gini index are the respective proxies for financial reforms, credit growth and income inequality. For the broad sample, findings reveal that financial reforms exhibit an indirect relationship with income inequality. For instance, from the FE results a percentage point change in the real interest rate is associated with 0.9% increase in credit growth, and a percentage change in credit growth is associated with 0.045% decrease in income inequality, on average, ceteris paribus. Similarly, results from DFE show that a percentage change in credit growth is associated with 0.062% decrease in income inequality, on the average. Results across the four regions vary. Credit growth reduces inequality significantly in Southern Africa by 0.207% while it aggravates inequality in East Africa by 0.036%. For Cameroon, Nigeria and South Africa, credit growth exhibits equalising impact on income while the reverse is the case in Kenya. Hence, contribution is made to the literature by providing evidence that the reform-credit-inequality nexus exists in addition to validating both the McKinnon-Shaw (1973) hypothesis that at a higher interest rate, financial intermediation improves. Results also validate the extensive margin theory of Greenwood and Jovanovich (1990) that as credit is extended and made available to those initially excluded income inequality reduces. Another contribution made to the scholarship methodology is empirically unbundling the effect of financial reforms on income inequality. Given these findings, one of the recommendations is that financial reforms policies that drive financial intermediation be pursued by stakeholders as these will indirectly lead to a reduction in income inequality. In other words, the ability to stimulate credit growth may be one of the avenues to reducing the income inequality gap in SSA and in developing economies in general.
Related Project Materials
RELATIONSHIP BETWEEN STEP-FATHERING AND PERSONALITY DEVELOPMENT
ABSTRACT
This study attempted to investigate the relationship between step-fathering and personality development among S...
THE EFFECT OF LOAN MANAGEMENT IN RELATION TO BANK'S PROFITABILITY
Statement of the problem
The bank’s ability to g...
THE NIGERIA MEDIA UNDER THE MILITARY RULE
ABSTRACT
The interim national government headed by chief Earnest Shonekan popularly known as “ING” was a child of circumstanc...
FACTORS AFFECTING STUDENTS CHEMISTRY PERFORMANCE IN WEST AFRICAN SENIOR SCHOOL CERTIFICATE EXAMINATION
ABSTRACT
The major objective of the study was to find out factors affecting chemistry performance in Ordinary Level National examinations...
IMPACT OF BIO-DATA OF DRIVERS ON THE LEVEL OF ROAD ACCIDENTS IN NIGERIA (A CASE STUDY OF ONITSHA-OWERRI HIGHWAY)
Abstract
The aim and objectives of this study centred on the analysis of Bio data of drivers on the level of Road Traffi...
THE IMPORTANCE FOR CREATION AND DEVELOPMENT OF GOOD SUPPLER RELATIONSHIP IN A COMPETITIVE MARKET
ABSTRACT
This is a research study on the importance for creation and development of good supplier relat...
AN INVESTIGATION INTO THE FACTORS THAT INFLUENCE STUDENTS MISBEHAVIOUR AND FACTORS THAT DETERMINE QUALITY EDUCATION IN NIGERIA TERTIARY INSTITUTIONS
ABSTRACT
This study was carried out to study the factors that influence students misbehaviour and...
TERRORISM AND ITS IMPLICATION ON GLOBAL SECURITY IN THE 21ST CENTURY
ABSTRACT
The research presented in this work highlights a complex and rapidly changing set of dynamics...
A CRITICAL REVIEW OF CIVIL SERVANT INDISCIPLINE AND ITS EFFECT ON PRODUCTIVITY
STATEMENT OF THE PROBLEM
Public/Civil Servants, in contemporary public organizations in Nigeria, exhibi...
IMPACT OF INFLATION ON INVESTMENT AND ECONOMIC GROWTH IN NIGERIA
ABSTRACT
This study investigated the impact of inflation on investment and economic growth in Nigeria....
