Author(s): Andrews Salakpi, Theophile Bindeoue Nasse ,Clement Nangpiire
Investment and the growth of the financial sectors are indispensable to the expansion of any economy. Using data from 1996 to 2020, this study explored the relationship between the development of Africa's financial sector and domestic investment. Panel units root and cointegration tests were applied with pooled mean group (PMG) estimates and Autoregressive Distributed Lag (ARDL) models. Once cointegration was identified, a positive short and long-run relationship between domestic investment and financial development on economic growth was found. The analysis concluded that the exact impact of financial sector growth on domestic investment is dependent on proxies and time periods. More also, the impact of real GDP per capital on domestic investment varies widely depending on the model's parameters and the time frame considered. The key policy implication is that short and long-term domestic investment in Africa, a combination of a large money supply, private loans, and domestic credit apportionment in general is required.