IMPACT OF FINANCIAL REPRESSION ON ECONOMIC GROWTH OF AFRICA
Mounde Waziri Lamorde, Sunday Augustine and Amade Peter
Volume 9 Issue 2
Abstract
Financial repression is a common policy that governments use for several reasons especially in the developing countries of Africa. The study investigated the impact of financial repression on economic growth of African countries between 1995 and 2021. The study was conducted using panel datasets obtained from the World Development Indicators of the World Bank. The data were analyzed using the dynamic panel data estimation technique of System GMM. The result of the study reveals that interest rate, bank liquidity ratio and inflation were found to have a negative impact on economic growth of African countries. On the other hand, interests on deposit have positive and significant impact on economic growth of African countries. The study concludes that repressive financial policies have a negative impact on economic growth of African countries. The study recommends that the monetary authorities should ease the financial repression and raise deposit interest rate or liberalize interest rate. It also recommends that African countries to engage in gradual financial liberalization with a minimal repressive policy on restrictions such as capital account and entry into the financial sector, the government should oversee the financial liberalization process. Keywords: Financial Repression, Economic Growth, Interest Rate, Bank Liquidity Ratio.
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