Financial Sector Development and Economic Growth in Algeria: an ARDL Bounds Testing Approach 1980-2017

Abstract

* Corresponding author, e-mail: [email protected] Abstract: This study empirically examines the relationship between financial sector development and economic growth in Algeria over the period 1980–2017, using the auto-regressive distributed lag approach to co-integration analysis, depending on real gross domestic product per capita as a dependent variable, broad money and domestic credit to private sector as a measure of financial development. Our results reveal that the relationship between financial development and economic growth in Algeria is not significantly different from what has been observed generally in oildependent economies. The finance-growth relation in Algeria is found to be insignificantly positive. These findings suggest a dire need for financial reforms in Algeria in order to improve efficiency in the financial sector so as to stimulate investment and saving and thus, long-term economic growth.