Financial Markets Development and Economic Competitiveness Growth in ECOWAS

Abstract

Purpose - The study aimed at investigating the effects of financial markets development on economic competitiveness growth in the Economic Community of West African States (ECOWAS) through both aggregated and a disaggregated approach of financial markets development variables.

Design/methodology/approach:The study adopted Random Effect regression models after conducting the Hausman test to analyze the panel data of seven West African countries over the period of 10 years (2008–2017). Annual data from the Global Competitiveness Reports issued by the World Economic Forum was usedfor the study.

Findings-The results of the regression analysis disclosed that of the major variables of the study; Financial Market Development Growth (FMDG), Venture Capital Availability Growth (VCAG) and Soundness of Banks Growth (SBG) were observed to have a significant positive effect on economic competitiveness growth. This is an indication of the existence of a relationship between these variables and economic competitiveness. Yet, one of the major variables of interest – Ease of Access to Loans Growth (EALG) had an insignificant negative effect on economic competitiveness growth.

Research limitations/implications -The study recommends conscious efforts by financial authorities and marketregulators to building resilient financial markets through the promotion of venture capital availability and sound banking systems.

Originality/value–The study investigates the transmission mechanism of Financial Markets Development on Economic Competitiveness in promoting Economic growth using both aggregated and disaggregated approaches. The paper recognizes the fact that financial markets development plays a critical role in the tenets of economic growth, but such a role is exerted through economic competitiveness.