Abstract:
The study investigated the nexus between financial sector
development and economic growth in South Africa using cointegration and
error correction modelling and; the Granger causality tests. The results of the
study show that economic growth is explained by the financial sector variables
and control variables such as inflation, exchange rate, and real interest rates.
The Granger causality test results show that there is generally a bidirectional
relationship between economic growth and financial sector development which
implies that if the economy grows the financial services sector also grows and
vice versa.
