Journal of Finance and Bank Management

Financial Development, Human Capital, and Economic Growth: New Evidence from Sierra Leone
Alimamy Amara Kargbo, Yibing Ding, Mohamed Kargbo

Abstract
The financial sector performance and human capital development have been weak in most Sub- Saharan Africa countries since the 1970s to 2000s. The region has suffered tremendously from low level of human and physical capital accumulation leading to severe constraint on resources used for development of the financial sector and consequently impacted negatively on financial sector stability and hence economic growth. This is the case for Sierra Leone, the financial sector performance and human capital accumulations have been poor and leading to considerable financing gap for investment with adverse consequences on poverty alleviation and economic growth. Given the relevance of finance and human capital on growth, this study examines the link between financial development and human capital accumulation on economic growth in Sierra Leone from 1980-2012, using the Ordinary Least Squares (OLS) regression estimation technique. This study shows that the simultaneous interaction of financial development and human capital accumulation are significant and impact positively on growth. However, inflation is found to reduce the growth of output and is insignificant. The policy implication is that the enable environment for investment in the real as well as the financial sector growth policy should be pursued. Therefore, the government should strive to ensure sound macroeconomic stability. This study contributes to the current literature by providing an econometric understanding of relationships in finance, human capital, and economic growth for SSA countries. This understanding is of relevance to academics, policy makers, and development partners in shaping future financial development, human capital accumulation, and economic growth.

Full Text: PDF     DOI: 10.15640/jfbm.v4n1a4