An Empirical Examination of the Impact of Banks on Economic Growth in Sierra Leone (2001-2017)
- 1 Faculty of Management Science, Institute of Public Administration and Management (IPAM), University of Sierra Leone, Freetown, Sierra Leone
- 2 Department of Banking and Finance, Institute of Public Administration and Management (IPAM), University of Sierra Leone, Freetown, Sierra Leone
- 3 Department of Accountancy, Institute of Public Administration and Management (IPAM), University of Sierra Leone, Freetown, Sierra Leone
Abstract
Banking sector development is considered as an essential driver of economic growth. Thus, this study examines the impact of the banking sector on the economic growth of Sierra Leone using indicators like bank liquidity reserve to bank asset ratio, domestic credit to private sectors, interest rate spread, gross domestic savings and deposit interest rate , and gross domestic product using yearly data from the period of 2001 to 2017. An empirical model was carried out using ordinary least square regression. From the outcomes of the regression, analysis , and results, GDP is strongly influenced by some of the banking indicators especially domestic credit to the private sector. It is seen that domestic credit to the private sector has a positive and significant impact on GDP, while deposit on interest rate has a positive but insignificant impact o n GDP. The other indicators such as bank liquidity reserve, interest rate spread , and gross domestic savings neither have positive nor significant to GDP. Domestic credit to the private sector tends to have a positive impact.
- Abusharbe, M. T. (2017). The Impact of Banking Sector Development on Economic Growth: Empirical Analysis from Palestinian Economy. Journal of Emerging Issues in Economics, Finance and Banking, 6, 2306-2316.
- Annor, E. S., & Obeng, F. S. (2017). The Effect of Credit Risk Management on Financial Performance of Nigerian Listed Deposit Money Banks. Scholedge International Journal of Business Policy and Governance, 5, 53-62.
- Apergis, N., Filippidis, J., & Economidou, C. (2007). Financial Deepening and Economic Growth Linkages: A Panel Data Analysis, Review of World Economics, 143, 179-198. https://doi.org/10.1007/s10290-007-0102-3
- Aurangzeb, Q. (2012). Contribution of Banking Sector in Economic Growth: A Case for Pakistan. Economics and Finance Review, 2, 45-54.
- Bencivenga, V. R., & Smith, B. D. (1991). Financial Intermediation and Endogenous Growth. Review of Economics Studies, 58, 195-209. https://doi.org/10.2307/2297964
- Calderon, С., & Liu, L. (2003). The Direction of Causality between Financial Development and Economic Growth. Journal of Development Economics, 72, 321-334. https://doi.org/10.1016/S0304-3878(03)00079-8
- Duramany-Lakkoh, E. K. (2020). The Effect of Fiscal Policy on Financial Sector Development in Sierra Leone: A Time Series Approach. International Journal of Development and Economic Sustainability, 8, 1-23.
- Duramany-Lakkoh, E. K. (2021a). Measuring Financial Performance for the Sustainability of Microfinance Institutions in Sierra Leone before the Ebola Outbreak. Journal of Financial Risk Management, 10, 274-297. https://doi.org/10.4236/jfrm.2021.103016
- Duramany-Lakkoh, E. K. (2021b). Surveying the Socioeconomic and Business Dimensions of Microfinance Institutions in Rural Sierra Leone before the Ebola Outbreak: A Descriptive Statistical Approach. Journal of Financial Risk Management, 10, 172-186. https://doi.org/10.4236/jfrm.2021.103016
- Duramany-Lakkoh, E. K., Jalloh, M. S., & Jalloh, A. (2021). Foreign Direct Investment and Manufacturing Sector in Sierra Leone: A Vector Auto-Regression Analysis Approach. Journal of Mathematical Finance, 11, 620-650. https://doi.org/10.4236/jmf.2021.114034
- Fisher, I. (1930). The Theory of Interest, as Determined by Impatience to Spend Income and Opportunity to Invest It. Macmillan.
- Harrod, R. (1948). Towards a Dynamic Economics. Macmillan.