The Effect Of Financial Liberalization On Economic Growth Panel Data Evidence From Selected Igad Countries

Finance nexus growth deep-rooted well in academic discourse. The relationship between bothrnhas been hotly debated since 1970 and no consensus is reached. The relationship betweenrnfinancial liberalization policies and economic growth is controversial. Effect of financialrnliberalization differs among countries. This paper attempts to examine the effect of financialrnliberalization on economic growth of four selected IGAD countries (Djibouti, Ethiopia, Kenyarnand Uganda) selection of these four countries out of seven countries in the region is based onrnavailability of the data. The study used quantitative research design. In order to achieve thernobjective of the study, panel data were used for the period of 2007-2016. Data were analyzed onrnquantitative basis using descriptive and regression analysis (Ordinary Least Square) method.rnFixed effect model was employed in the regression. The obtained result from fixed regressionrnreveled that exchange rate and degree of openness were statistically significant and havernpositive relationship with economic growth. On the contrary, variables like lending rate andrnfinancial deepening were statistically significant and have negative relationship with economicrngrowth. Inflation has positive relationship with economic growth nevertheless it is statisticallyrninsignificant. From the result, trade openness would no doubt enhance economic growth and therngovernment in the region has to intensify efforts that provide better financial system.

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