Financial development, financial structure and economic growth in the Sub-Saharan African countries

We use a financial development indicator to revisit the relationship of financial development and financial structure with economic growth. The financial development indicator simultaneously takes into account accessibility, depth and financial efficiency for the period 1980-2017 for Sub-Saharan Africa countries. The continuously updated fully modified (Cup-FM) and continuously updated bias corrected (Cup-BC) estimators, as well as the panel smooth transition regression (PSTR), were used to examine the linear and nonlinear effects of financial development and financial structure on economic growth. For low-income countries, the Cup-FM and the Cup-BC estimators indicate that the financial system relies on financial markets. The findings obtains through the PSTR model confirm this conclusion when the financial market represents more than 34% of financial institutions. For middle-income countries, the Cup-FM and Cup-BC estimators reveal that the financial system relies on banking industry. However, this result is not supported by the PSTR model. In fact, it indicates that the financial system in these countries is based on financial markets when government expenditure as percentage of gross domestic product is less than 2.62%. Above this threshold, the financial system depends on the development of financial services, legal and regulatory framework.