n Journal of Strategic Studies : A Journal of the Southern Bureau of Strategic Studies Trust - Examining the effect of financial sector development on Zimbabwe’s economic growth 1980-2014

Volume 8 Number 1
  • ISSN : 2076-6645
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The primary purpose of this study is to investigate the effect of the Zimbabwe financial sector development on the growth of the economy. Countries with vibrant well developed financial institutions appear to grow faster, particularly the size of the banking sector and the liquidity of the stock markets have an inclination to positively impact economic growth. This study contributes to the growing debate on the issue of financial development indicators and economic growth in Zimbabwe. In approach, the OLS method of the regression analysis was employed, financial development proxy was the ratio of liquidity liabilities to GDP (M2/GDP) , ratio of credit to private credit sector to GDP while the real GDP (RGDP) measured economic growth and RINT measured market liberalisation. It is a finding of the study that only the real interest rate (RINT) was statistically significant and negatively related to real GDP (RGDP). This is attributed to lack of control over money supply resulting in shocks to the Zimbabwean economy being absorbed by the real sector. The overall statistics indicate that the independent variables were able to explain 43 percent variance in the dependent variable. In outlook, the financial sector remains weak and could not garner the vitality necessary to propel growth. Authorities wish to fully integrate the financial services sector with the global economy and conclude negotiations with IFIs in order for the economy to be able to access cheaper inflows of financing.

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