Financial Liberalization and Economic Growth in Anglophone West African Countries

Abstract

Financial market liberalization is a key aspect of economic globalization, with capital flows from developed to developing countries expected to enhance growth. This study assessed the impact of financial liberalization on economic growth in Anglophone West African countries from 1990 to 2022. Data were obtained from UNCTAD, the World Bank’s World Development Indicators (WDI), and IMF databases. Financial liberalization indicators, including bank credit to the private sector and savings mobilization, were analyzed alongside inflation, interest rate, and financial market depth. Using unit root and cointegration tests, the study employed the Pooled Mean Group (PMG) estimator within static and dynamic panel frameworks. The results showed mixed integration orders of I(0) and I(1), while the Kao cointegration test confirmed a long-run equilibrium relationship between financial liberalization and economic growth. PMG estimates revealed that financial openness had a positive and significant effect on growth. Financial market depth had a positive but insignificant effect. Interest rate had a negative and significant impact, while savings mobilization and inflation had negative and insignificant effects on growth. The study concludes that financial openness is a key driver of economic growth in the region and recommends a coordinated policy approach to strengthen financial systems for sustained growth.