Abstract
We relate risk in the African financial system to its long-run economic performance under structural changes and cross-sectional dependence. To achieve this objective, we generate risk indexes from several measures of financial soundness. We find a long-run relationship between financial risk factors and economic performance indicators. Financial risk factors induce about 3% fall in RGDPP in the long-run. This impact is huge in Kenya, Nigeria, Madagascar, Mauritius and Rwanda, whereas a reduction in employment is more prominent in Kenya, Madagascar and South Africa in this order. The capital risk index is more relevant in explaining economic performance in Africa.
Original language | English |
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Pages (from-to) | 1910-1936 |
Number of pages | 27 |
Journal | The World Economy |
Volume | 45 |
Issue number | 6 |
Early online date | 22 Nov 2021 |
DOIs | |
Publication status | Published - Jun 2022 |
Keywords
- Africa
- financial risk
- growth
- performance