Economic Performance and Financial Conditions Index Nexus: Evidence from Selected Sub-Saharan African Countries

Ogbonna Udochukwu Godfrey; Ejem Chukwu Agwu

doi:doi:10.11648/j.jfa.20200803.17

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Economic Performance and Financial Conditions Index Nexus: Evidence from Selected Sub-Saharan African Countries

Ogbonna Udochukwu Godfrey, Ejem Chukwu Agwu

Published in Journal of Finance and Accounting (Volume 8, Issue 3)

Received: 7 May 2020 Accepted: 25 May 2020 Published: 17 June 2020

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Abstract

The purpose this study is to construct a financial conditions index for six sub-Saharan African Countries; namely, Nigeria, South Africa, Namibia, Mauritius, Kenya and Ghana, within the dynamic panel data framework using annual data covering from 2009 to 2018. The variables included in the construction of the index are treasury bills rate, real effective exchange rate, interest rate spread, credit to private sector ratio to Gross Domestic Product and value of stocks traded. The weights attached to these variables in the construction of the financial conditions index are estimated using the dynamic fixed effects coefficients, while the predictive power of the constructed index is evaluated within the dynamic panel General Method Moment framework. The output of analysis found that while real GDP per capita growth is not significantly related to real effective exchange rate, interest rate spread and credit to private sector ratio to Gross Domestic Product, it is significantly related to treasury bills rate and value of stocks traded. Thus, the effectiveness of monetary policy in the selected sub-Saharan countries depends only on money market and capital market conditions. Also results show that in Namibia, Ghana, Kenya and Nigeria, the financial conditions have been tighter than the prevailing macroeconomic conditions, while South Africa’s financial conditions have been looser than its prevailing macroeconomic conditions. However, Mauritius’ financial conditions have been neither tighter nor looser than its prevailing macroeconomic conditions. In the light of the above, the researchers suggest that the focus of monetary policy in the selected sub-Saharan countries has been to reduce inflation.

Published in	Journal of Finance and Accounting (Volume 8, Issue 3)
DOI	10.11648/j.jfa.20200803.17
Page(s)	158-164
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Financial Conditions Index, Inflation, GDP Per Capita

References

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Ogbonna Udochukwu Godfrey, Ejem Chukwu Agwu. (2020). Economic Performance and Financial Conditions Index Nexus: Evidence from Selected Sub-Saharan African Countries. Journal of Finance and Accounting, 8(3), 158-164. https://doi.org/10.11648/j.jfa.20200803.17

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Ogbonna Udochukwu Godfrey; Ejem Chukwu Agwu. Economic Performance and Financial Conditions Index Nexus: Evidence from Selected Sub-Saharan African Countries. J. Finance Account. 2020, 8(3), 158-164. doi: 10.11648/j.jfa.20200803.17

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AMA Style

Ogbonna Udochukwu Godfrey, Ejem Chukwu Agwu. Economic Performance and Financial Conditions Index Nexus: Evidence from Selected Sub-Saharan African Countries. J Finance Account. 2020;8(3):158-164. doi: 10.11648/j.jfa.20200803.17

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@article{10.11648/j.jfa.20200803.17,
  author = {Ogbonna Udochukwu Godfrey and Ejem Chukwu Agwu},
  title = {Economic Performance and Financial Conditions Index Nexus: Evidence from Selected Sub-Saharan African Countries},
  journal = {Journal of Finance and Accounting},
  volume = {8},
  number = {3},
  pages = {158-164},
  doi = {10.11648/j.jfa.20200803.17},
  url = {https://doi.org/10.11648/j.jfa.20200803.17},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20200803.17},
  abstract = {The purpose this study is to construct a financial conditions index for six sub-Saharan African Countries; namely, Nigeria, South Africa, Namibia, Mauritius, Kenya and Ghana, within the dynamic panel data framework using annual data covering from 2009 to 2018. The variables included in the construction of the index are treasury bills rate, real effective exchange rate, interest rate spread, credit to private sector ratio to Gross Domestic Product and value of stocks traded. The weights attached to these variables in the construction of the financial conditions index are estimated using the dynamic fixed effects coefficients, while the predictive power of the constructed index is evaluated within the dynamic panel General Method Moment framework. The output of analysis found that while real GDP per capita growth is not significantly related to real effective exchange rate, interest rate spread and credit to private sector ratio to Gross Domestic Product, it is significantly related to treasury bills rate and value of stocks traded. Thus, the effectiveness of monetary policy in the selected sub-Saharan countries depends only on money market and capital market conditions. Also results show that in Namibia, Ghana, Kenya and Nigeria, the financial conditions have been tighter than the prevailing macroeconomic conditions, while South Africa’s financial conditions have been looser than its prevailing macroeconomic conditions. However, Mauritius’ financial conditions have been neither tighter nor looser than its prevailing macroeconomic conditions. In the light of the above, the researchers suggest that the focus of monetary policy in the selected sub-Saharan countries has been to reduce inflation.},
 year = {2020}
}

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TY  - JOUR
T1  - Economic Performance and Financial Conditions Index Nexus: Evidence from Selected Sub-Saharan African Countries
AU  - Ogbonna Udochukwu Godfrey
AU  - Ejem Chukwu Agwu
Y1  - 2020/06/17
PY  - 2020
N1  - https://doi.org/10.11648/j.jfa.20200803.17
DO  - 10.11648/j.jfa.20200803.17
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 158
EP  - 164
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20200803.17
AB  - The purpose this study is to construct a financial conditions index for six sub-Saharan African Countries; namely, Nigeria, South Africa, Namibia, Mauritius, Kenya and Ghana, within the dynamic panel data framework using annual data covering from 2009 to 2018. The variables included in the construction of the index are treasury bills rate, real effective exchange rate, interest rate spread, credit to private sector ratio to Gross Domestic Product and value of stocks traded. The weights attached to these variables in the construction of the financial conditions index are estimated using the dynamic fixed effects coefficients, while the predictive power of the constructed index is evaluated within the dynamic panel General Method Moment framework. The output of analysis found that while real GDP per capita growth is not significantly related to real effective exchange rate, interest rate spread and credit to private sector ratio to Gross Domestic Product, it is significantly related to treasury bills rate and value of stocks traded. Thus, the effectiveness of monetary policy in the selected sub-Saharan countries depends only on money market and capital market conditions. Also results show that in Namibia, Ghana, Kenya and Nigeria, the financial conditions have been tighter than the prevailing macroeconomic conditions, while South Africa’s financial conditions have been looser than its prevailing macroeconomic conditions. However, Mauritius’ financial conditions have been neither tighter nor looser than its prevailing macroeconomic conditions. In the light of the above, the researchers suggest that the focus of monetary policy in the selected sub-Saharan countries has been to reduce inflation.
VL  - 8
IS  - 3
ER  -

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Author Information

Ogbonna Udochukwu Godfrey

Department of Management Science, Rhema University, Aba, Nigeria
Ejem Chukwu Agwu

Department of Banking and Finance, Abia State University, Uturu, Nigeria

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APA Style

Ogbonna Udochukwu Godfrey, Ejem Chukwu Agwu. (2020). Economic Performance and Financial Conditions Index Nexus: Evidence from Selected Sub-Saharan African Countries. Journal of Finance and Accounting, 8(3), 158-164. https://doi.org/10.11648/j.jfa.20200803.17

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ACS Style

Ogbonna Udochukwu Godfrey; Ejem Chukwu Agwu. Economic Performance and Financial Conditions Index Nexus: Evidence from Selected Sub-Saharan African Countries. J. Finance Account. 2020, 8(3), 158-164. doi: 10.11648/j.jfa.20200803.17

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AMA Style

Ogbonna Udochukwu Godfrey, Ejem Chukwu Agwu. Economic Performance and Financial Conditions Index Nexus: Evidence from Selected Sub-Saharan African Countries. J Finance Account. 2020;8(3):158-164. doi: 10.11648/j.jfa.20200803.17

Copy | Download

@article{10.11648/j.jfa.20200803.17,
  author = {Ogbonna Udochukwu Godfrey and Ejem Chukwu Agwu},
  title = {Economic Performance and Financial Conditions Index Nexus: Evidence from Selected Sub-Saharan African Countries},
  journal = {Journal of Finance and Accounting},
  volume = {8},
  number = {3},
  pages = {158-164},
  doi = {10.11648/j.jfa.20200803.17},
  url = {https://doi.org/10.11648/j.jfa.20200803.17},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20200803.17},
  abstract = {The purpose this study is to construct a financial conditions index for six sub-Saharan African Countries; namely, Nigeria, South Africa, Namibia, Mauritius, Kenya and Ghana, within the dynamic panel data framework using annual data covering from 2009 to 2018. The variables included in the construction of the index are treasury bills rate, real effective exchange rate, interest rate spread, credit to private sector ratio to Gross Domestic Product and value of stocks traded. The weights attached to these variables in the construction of the financial conditions index are estimated using the dynamic fixed effects coefficients, while the predictive power of the constructed index is evaluated within the dynamic panel General Method Moment framework. The output of analysis found that while real GDP per capita growth is not significantly related to real effective exchange rate, interest rate spread and credit to private sector ratio to Gross Domestic Product, it is significantly related to treasury bills rate and value of stocks traded. Thus, the effectiveness of monetary policy in the selected sub-Saharan countries depends only on money market and capital market conditions. Also results show that in Namibia, Ghana, Kenya and Nigeria, the financial conditions have been tighter than the prevailing macroeconomic conditions, while South Africa’s financial conditions have been looser than its prevailing macroeconomic conditions. However, Mauritius’ financial conditions have been neither tighter nor looser than its prevailing macroeconomic conditions. In the light of the above, the researchers suggest that the focus of monetary policy in the selected sub-Saharan countries has been to reduce inflation.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Economic Performance and Financial Conditions Index Nexus: Evidence from Selected Sub-Saharan African Countries
AU  - Ogbonna Udochukwu Godfrey
AU  - Ejem Chukwu Agwu
Y1  - 2020/06/17
PY  - 2020
N1  - https://doi.org/10.11648/j.jfa.20200803.17
DO  - 10.11648/j.jfa.20200803.17
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 158
EP  - 164
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20200803.17
AB  - The purpose this study is to construct a financial conditions index for six sub-Saharan African Countries; namely, Nigeria, South Africa, Namibia, Mauritius, Kenya and Ghana, within the dynamic panel data framework using annual data covering from 2009 to 2018. The variables included in the construction of the index are treasury bills rate, real effective exchange rate, interest rate spread, credit to private sector ratio to Gross Domestic Product and value of stocks traded. The weights attached to these variables in the construction of the financial conditions index are estimated using the dynamic fixed effects coefficients, while the predictive power of the constructed index is evaluated within the dynamic panel General Method Moment framework. The output of analysis found that while real GDP per capita growth is not significantly related to real effective exchange rate, interest rate spread and credit to private sector ratio to Gross Domestic Product, it is significantly related to treasury bills rate and value of stocks traded. Thus, the effectiveness of monetary policy in the selected sub-Saharan countries depends only on money market and capital market conditions. Also results show that in Namibia, Ghana, Kenya and Nigeria, the financial conditions have been tighter than the prevailing macroeconomic conditions, while South Africa’s financial conditions have been looser than its prevailing macroeconomic conditions. However, Mauritius’ financial conditions have been neither tighter nor looser than its prevailing macroeconomic conditions. In the light of the above, the researchers suggest that the focus of monetary policy in the selected sub-Saharan countries has been to reduce inflation.
VL  - 8
IS  - 3
ER  -

Copy | Download