Bank Stability and Economic Growth in Sub-saharan Africa

Abstract

The study determines the nexus between bank stability and economic growth in Sub-Saharan Africa. For the purpose of this study, both the short-run and long-run dimensions was captured to assess the influence of bank stability on economic growth. Through the explanatory research design and quantitative research approach, the analysis of the study were performed. The secondary data was utilised in a panel form, and span 2000 to 2017. Analysis of the study was conducted with the aid of the System Generalised Method of Moments (SGMM). The study sought to examine the role of bank stability in influencing economic growth. In this regard, the study’s objectives were to examine the short-run and long-run relationships between bank stability and economic growth. The study reveals several findings that are significant and useful for policy. Findings from the study can be categorized into two: the short-run effect of bank stability on economic growth; and the long-run effect of bank stability on economic growth. Firstly, on the relationship between bank stability and economic growth, the study finds that the stability of the banking sector has a significant positive effect on economic activity. Secondly, the study finds that bank stability has a significant positive impact on economic growth in the long-rum in SSA. It is recommended that governments in the Sub-Saharan African (SSA) countries and regulators must make attempts to improve regulations in the banking sector in terms of activity restriction and supervision to minimize bank risk taking behaviours in their economies so as to ensure a sustainable banking sector which can have a positive impact on economic growth.