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THE EFFECTS OF ECONOMIC GROWTH ON FINANCIAL DEVELOPMENT IN NIGERIA: INTERACTING ROLE OF FOREIGN DIRECT INVESTMENT: AN APPLICATION OF NARDL
Abstract- The concern of this paper is to analyze the effect of economic growth as well as theinteracting role of foreign direct investment and economic growth on the Nigerian Financial sector. The study uses the time series data spanning the period 1970-2018. The econometrics techniques of Gregory and Hansen (1996) co-integration, Non-linear ARDL as the elasticity estimator, and the Diks and Panchenko (2006) for the causality were deployed. The co-integration result shows the presence of a long-run relationship between the variables.However, the result confirms the evidence of asymmetry in economic growth concerning financial development. Further findings indicate the existence of unidirectional non-linear causality between economic growth and financial development. We also found a one-way causality between foreign direct investment running to financial development. We, therefore, conclude that economic growth and foreign direct investment have an overall positive and significant effect on financial development. The paper recommends that there should be an improvement in the real sector and device means to attract more external investors as it will lead to a positive spillover effect on financial sector development.
Index Terms: Non-linear ARDL, Diks, and Panchenko, Gregory Hansen, Interaction, Financial Development.