n AfricaGrowth Agenda - Finance and institutions in the Southern African Customs Union (SACU)

Volume 2013, Issue 1
  • ISSN : 1811-5187


The role of financial development in economic growth cannot be overemphasised. A plethora of studies have provided empirical evidence on this relationship (King and Levine, 1993; Levine, 1997). There is however, a conundrum associated with why some economies have deeper levels of financial development than others. The literature strand exploring the link between finance and institutions tends to attribute this disparity in the levels of financial development to the varying quality of institutions from country to country. Four types of hypotheses emerge from this literature, namely; the endowment hypothesis, simultaneous openness hypothesis,law and finance hypothesis and economic institutions hypothesis. It is crucial to study this issue for developing countries which peculiarly suffer from institutional suffocate. The study examines the nature of the relationship between financial development and quality of institutions in the context of the Southern African Customs Union (SACU).

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