Modeling MSMEs Financing and Economic Growth: Evidence from Nigeria

Mathematical Theory and Modeling, Vol. 5, No. 8, 2015

13 Pages Posted: 5 Jun 2016

See all articles by Christopher Kalu

Christopher Kalu

Nnamdi Azikiwe University - Department of Economics

Maria Uzonwanne

Nnamdi Azikiwe University - Department of Economics

Kene Okeyika

Nnamdi Azikiwe University - Department of Economics

Olisaemeka Maduka

Nnamdi Azikiwe University - Department of Economics

Date Written: June 3, 2015

Abstract

MSMEs constitute the driving force in the attainment of industrial growth and development. Several previous studies have examined the relationship between MSMEs financing and economic growth in Nigeria but the results of these studies are still mixed. Therefore, this paper examines the causality between MSMEs financing and economic growth in Nigeria during the periods 1992 to 2013. However, the analysis technique of this study differs from the previous studies as the approaches of the previous studies are not adequate in obtaining robust estimates and drawing meaningful inference given the potential impact of MSMEs financing on economic growth. Unlike previous studies that totally relied on traditional methods for unit root testing, co-integration analysis, and causality test, our study relies on the ultra-modern econometric methods such as; the Ng-Perron modified unit root test, Autoregressive Distributed Lag (ARDL) Bound testing approach to co-integration, parsimonious ECM version of ARDL model, and the Toda-Yamamoto causality procedure. The empirical results indicate evidence of a stable long-run relationship among the chosen variables. The Toda-Yamamoto causality test show evidence of a unidirectional causality running from MSMEs financing to MSMEs output, a bi-directional causality between MSMEs output and economic growth, as well as, a unidirectional causality running from MSMEs financing to economic growth in Nigeria during the periods covered. The study therefore recommends that the government through the monetary authority (CBN) should energize the MSMEs by instituting a programme that will adequately promote the financing of MSMEs with relatively low interest rate for sustainable economic growth.

Keywords: MSMEs financing, economic growth, Ng-Perron, ARDL, Toda-Yamamoto

Suggested Citation

Kalu, Christopher and Uzonwanne, Maria and Okeyika, Kene and Maduka, Olisaemeka, Modeling MSMEs Financing and Economic Growth: Evidence from Nigeria (June 3, 2015). Mathematical Theory and Modeling, Vol. 5, No. 8, 2015, Available at SSRN: https://ssrn.com/abstract=2789967

Christopher Kalu

Nnamdi Azikiwe University - Department of Economics ( email )

Enugu-Onitsha Expressway
Nnamdi Azikiwe University
Awka, Anambra
Nigeria

Maria Uzonwanne (Contact Author)

Nnamdi Azikiwe University - Department of Economics ( email )

Enugu-Onitsha Expressway
Nnamdi Azikiwe University
Awka, Anambra
Nigeria

HOME PAGE: http://www.unizik.edu.ng/profile/uzonwannemc

Kene Okeyika

Nnamdi Azikiwe University - Department of Economics

Enugu-Onitsha Expressway
Nnamdi Azikiwe University
Awka, Anambra
Nigeria

Olisaemeka Maduka

Nnamdi Azikiwe University - Department of Economics

Enugu-Onitsha Expressway
Nnamdi Azikiwe University
Awka, Anambra
Nigeria

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