The impact of foreign capital inflows and property rights on financial development in ssa: panel dynamic model

Purpose: The paper examined impact of foreign capital inflows and property rights on financial development in SSA for the period 2000 to 2020 using dynamic panel data analysis. Design/methodology/approach: The System Generalized Method of Moments estimator (SGMM) was employed to determine the long-run and short-run dynamics of the link between the variables of interest. To create a single aggregate index for financial development and foreign capital inflow, the study performed Principal Component Analysis (PCA). Findings: The SGMM results revealed that there is a short run and long run relationship between financial development and property right index but not with foreign capital inflows. The results highlight that lag of financial development, property right and political stability exerts a positive and substantial effect on financial development of SSA in short run and long run. On the contrary, the result shows that inflation, gross domestic product per capita and gross domestic saving has negative and significant influence on financial development of SSA in short run and long run. Practical implications: Policymakers should formulate policies that aims to engineer more financial development. The policies should strike a balance between strengthening the private property rights, abate high inflation in financial markets, abolish political instability and enhancing past year level of financial growth in order to enliven financial development in SSA.