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
INFORMATION COMMUNICATION TECHNOLOGY (ICT) AND ACADEMIC PERFORMANCE OF STUDENTS IN TERTIARY INSTITUTIONS
Abstract
The study examined the effect of information communication technology on the academic performance of students i...
EFFECT OF SOCIO ECONOMIC BACKGROUND OF ADOLESCENT STUDENTS ON THE ACADEMIC ACHIEVEMENT IN SENIOR SECONDARY SCHOOL
ABSTRACT
This study centers on the effect of socio-economic background of Adolescent students on the ac...
THE ROLE OF EARLY CHILDHOOD EDUCATION IN REDUCING ANXIETY
ABSTRACT: The role of early childhood education in reducing anxiety is crucial...
THE IMPACT OF MARKETING CONCEPT ON SALE GROWTH (CASE STUDY OF RELENTED SMALL SCALE BUSINESS)
BACKGROUND OF THE STUDY
Current globalized marketing has prompted companies to see internationalizing t...
design and implementation of online campus fund raiser system
ABSTRACT
Fund-raising efforts at college and universities continue to be a top priority. It is clear that an institution...
EXTRACTION AND CHARACTERISATION OF MALTENE AND ASPHALTENE FROM AGBABU BITUMEN
ABSTRACT
Extraction is an important separation process for separating high value-added light oils from unconventional oils matrix such as...
ASSESSMENT OF THE OF ENTREPRENEURIAL SKILLS ACQUISITION ON HOME ECONOMICS STUDENTS’ PERFORMANCE IN JUNIOR SECONDARY SCHOOL IN NIGERIA
ABSTRACT
This study investigated the impact entrepreneurial skills acquisition on Home Economics students’ performance in junior se...
EVALUATION OF MODIFIED STARCHES AND MUCILAGE DISPERSIONS OBTAINED FROM IPOMOEA BATATAS L. LAM (CONVOLVULACEAE) AS BULK EXCIPIENTS IN CHEWABLE TABLET FORMULATIONS
ABSTRACT
Increasing attention has been paid to incorporating hydrocolloids into starch-based products due to their unique functional prop...
ADMINISTRATION OF THE DEATH PENALTY IN THE CRIMINAL JUSTICE SYSTEM IN GOMBE STATE: AN APPRAISAL
ABSTRACT
The main aims and objectives of this study titled; “ ADMINISTRATION OF THE DEATH PENALTY IN THE CRIMINAL JUSTICE SYSTEM IN...
PALYNOFACIES ANALYSIS AND THERMAL MATURATION STUDY OF SEDIMENTS OF IDM 4 AND IDM 5 WELLS OF NIGER DELTA BASIN, NIGERIA
ABSTRACT
Palynofacies analysis and thermal maturation study was carried out on IDM-4 and IDM5 wells of the Niger Delta Basin. The locatio...
