An Examination of Drivers of Financial development: Evidence in West African Countries.

Abstract

Financial development has been considered to play a vital role in promoting rapid growth and development of the developing economies. This paper examined the drivers of financial development in West African Countries. Benin Republic, Burkina Faso, Cape Verde, Ivory Coast, Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo over the period of 2000 to 2015, with the proper utilization of panel data estimation technique on the annual country data obtained from World Development Indicators (WDI) 2016 and Worldwide Governance Indicators (WGI) 2016. The results reveals that some important variables such as coefficient of rule of law, political stability, foreign direct investment, government expenditure, inflation and savings positively determined financial development. While, credit to private sector, GDP, interest rate, trade openness, and capital formation were found to negative impact on financial development. The study then recommends amongst others formulation and implementation of fiscal and monetary policies that foster financial development.