Financial determinants of domestic investment in sub-Saharan Africa: Evidence from panel data

This study investigates the effects of financial development on domestic investment in a sample of 30 sub-Saharan African countries. It is based on a dynamic serial-correlation investment model including various indicators of financial development, controlling for country-specific fixed effects and nonfinancial factors of investment. The results indicate a positive relationship between domestic investment (total investment and private investment) and various indicators of financial development. Higher financial development leads to higher future levels of investment, implying a potent long-run effect of financial development on domestic investment. The findings imply that financial development can stimulate economic growth through capital accumulation. (C) 2000 Elsevier Science Ltd. All rights reserved.