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All Journal Journal of Law, Economics, and Engineering Sociale : Journal of Social and Political Sciences
Anyalagbu, Cyprian S.
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Economics, Econometrics & Finance Engineering Law, Crime, Criminology & Criminal Justice Social Sciences

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Impact of Financial Development on Real Income Dynamics Anyalagbu, Cyprian S.; Anne Chinonye Maduka; Ogonna Emmanuel Ifebi; Collins Bruno Ibekilo
Sociale : Journal of Social and Political Sciences Vol 2 No 1 (2026): Social Science for Improve
Publisher : Yayasan Penelitian dan Pengabdian Masyarakat Sisi Indonesia

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This study investigates the impact of financial development on economic growth across 20 Sub-Saharan African countries from 2007 to 2024. Grounded in an augmented Solow growth framework, the research incorporates human capital and financial development as key determinants of output. To address endogeneity and unobserved heterogeneity, the authors utilized the System Generalized Method of Moments (SGMM) estimator. Preliminary diagnostics, including the Bond (2002) test, justified this approach by identifying bias patterns in OLS (0.5232) and Fixed Effects (-0.3533) estimations. Additionally, Pesaran (15.003, p=0.0000) and Friedman (85.631, p=0.0000) tests confirmed the presence of cross-sectional dependence that required control within the model. The empirical findings reveal that financial development impacts real income through distinct and sometimes conflicting channels. Financial institution access (0.163, p<0.05) and institutional quality (0.674, p<0.05) were found to have significant positive effects on economic growth. Conversely, the results indicate that financial market depth (-0.249, p<0.05) has a negative impact on growth, while financial efficiency (-0.049) remains statistically insignificant. Diagnostic checks, including Hansen (0.289) and AR(2) (0.331) tests, confirmed the validity and reliability of these results. Consequently, the study concludes that financial development affects growth unevenly across its channels. The authors recommend that policymakers focus on improving financial inclusion and strengthening institutional frameworks while exercising caution regarding the deepening of debt markets.
Effect of financial development on foreign direct investment in Sub-Saharan African countries Anyalagbu, Cyprian S.; Okafor, Reuben Izuchukwu; Obi, Cyril Ogugua
Journal of Law, Economics, and Engineering Vol. 2 No. 1 (2026)
Publisher : LPPM Universitas Pahlawan Tuanku Tambusai

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This study examined the impact of financial development on foreign direct investment (FDI) inflows in 20 Sub-Saharan African (SSA) countries from 2007 to 2024. Anchored on the Mankiw et al. (1992) endogenous growth model, the research evaluates how banking access, market depth, and institutional frameworks influence international capital. Using annual panel data (2007–2024) from 20 Sub-Saharan African countries, the research employs a two-step System GMM estimator to address endogeneity and heterogeneity. Key variables include FDI, institutional quality, and the Human Development Index. Pre-estimation diagnostics like the Bond and Pesaran tests ensure model integrity, while Hansen and Arellano-Bond tests verify instrument validity and consistency. System GMM analysis confirms that FDI in Sub-Saharan Africa is self-reinforcing, with a lagged coefficient of 0.37 (p < 0.01). Financial institution access promotes inflows (0.0317, p < 0.01), while institutional quality proves decisive (0.3284, p < 0.01). Conversely, financial market depth (-0.0390, p < 0.10) and human development (-6.7156, p < 0.01) show negative effects, suggesting that volatility and rising labor costs deter certain investments. Diagnostics, including a Hansen p-value of 0.740 and AR2 of 0.216, confirm the model's high reliability for policy formulation. The study concludes that while financial access and strong governance are essential for attracting FDI, SSA nations must transition from labor seeking to skill seeking investment models. Enhancing financial regulations alongside institutional reforms is critical to transforming financial development into a sustainable mechanism for attracting high quality foreign capital.
Co-Authors Anne Chinonye Maduka Collins Bruno Ibekilo Obi, Cyril Ogugua Ogonna Emmanuel Ifebi Okafor, Reuben Izuchukwu