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 |
|---|---|
| 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