Financial development and growth: Evidence from Bayesian Modelling

Figures & data

Figure 1. Growth, broad money and credit to the private sector trends, 1970–2020.

Table 1. Bayesian model averaging results

Codes	PIP	Post Mean	Post SD
DCP	1.00	0.03	0.00
INFL	0.70	−0.02	0.02
GDS	0.46	0.05	0.07
POPGR	0.46	0.00	0.00
LFP	0.42	−0.01	0.01
CUCAC	0.26	0.73	1.75
LR	0.18	−0.32	1.00
INFRA	0.17	0.02	0.07
DR	0.17	0.00	0.03
CROP	0.16	0.00	0.02
TOS	0.16	0.00	0.04
PERCA	0.16	0.01	0.03
BM	0.15	−0.01	0.08
LIT	0.14	6.93	60.82
DEBT	0.14	0.00	0.01
IMP	0.14	0.01	0.03
ATAX	0.14	0.00	0.01
GDPPER	0.13	−0.31	1.95
TAXPR	0.12	0.00	0.02
DEBTSER	0.12	0.00	0.05
TST	0.12	−0.02	0.37
MARCA	0.11	0.00	0.01
NDEPO	0.11	0.01	0.38
CAF	0.11	0.00	0.02
EXP	0.10	0.00	0.02

Source: Computed from, WDI (2022)

Table 2. Posterior means of the best five models

	Model 1	Model 2	Model 3	Model 4	Model 5
Inter	3.97045	4.80714	3.98963	3.99432	3.99153
BM	.	.	.	.	.
ATAX	.	.	.	.	.
PERCA	.	.	.	.	.
POPGR	.	.	.	.	.
IMP	.	.	.	.	.
GDPER	.	.	.	.	.
DEBT	.	.	.	.	.
DEBTSER	.	.	.	.	.
DR	.	.	.	.	.
CROP	.	.	.	.	.
CAF	.	.	.	.	.
TAXPR	.	.	.	.	.
LFP	−0.01562	−0.01531	.	.	−0.01622
INFRA	.	.	.	.	.
LIT	.	.	.	.	.
DCP	0.03177	0.03212	0.03199	0.03222	0.03155
INFL	−0.03843	−0.03913	−0.03819	−0.03921	−0.03904
GDS	0.12495	0.13405	.	0.07881	0.12316
MARCA	.	.	.	.	.
NDEPO	.	.	.	.	.
LR	.	.	.	.	−1.8262
CUCAC	.	2.98157	.	.	.
TOS	.	.	.	.	.
Exp	.	.	.	.	.
TST	.	.	.	.	.
NVar	4	5	2	3	5
r2	0.933	0.936	0.919	0.924	0.935
post prob	0.094	0.045	0.035	0.028	0.028

Author’s computation (2022)

Figure 2. Cumulative model Probabilities.

Table A1. Model variables

Codes	Full names
Gr	GDP growth
Inf	Annual rate of inflation
Lit	Total secondary school enrollment
Perca	GDP per capita
Debt	Debt per GDP
debtser	Total debt servicing per GDP
Bm	Broad money growth
Popgr	Annual population growth
caf	Fixed capital formation
Infra	Telephone per 100 people
Popden	Population density
Taxpr	Tax on profit
atax	Average tax to GDP
Exp	Export per GDP
Dcp	Domestic credit to the private sector
Marca	Market capitalisation of listed companies
Dr	Deposit rate
Lr	Lending rate
Crop	Total agriculture production per GDP
Gds	Gross domestic savings
Ndepo	Total number of depositors with commercial banks
Tst	Total value of stock traded
ToS	Turnover in the stock market
Cucac	Current account balance per GDP

Source: Author’s Construct, (2022)

Table A2. Correlation matrix of variables

	gr	bm	atax	perca	popgr	imp	infra	debtser	debt	taxpr	cucac	dr	lfp	infl	dcp	ndepo	lr	crop	gds	exp	tst
gr	1
bm	−0.0212	1
atax	−0.0591	0.2148	1
perca	0.1082	0.0285	−0.0032	1
popgr	−0.1985	0.0818	0.0579	−0.099	1
imp	−0.333	0.1675	0.1108	−0.1042	0.1521	1
infra	0.0626	−0.0637	0.0096	0.014	−0.0301	−0.2133	1
debtser	−0.0538	0.0737	0.0755	0.1383	0.1373	0.2345	0.1223	1
debt	−0.1244	−0.0694	0.2561	0.1958	0.1704	−0.0627	0.2386	0.4489	1
taxpr	−0.0341	0.0666	0.1213	0.4511	−0.0764	−0.0119	−0.1088	0.2095	0.2594	1
cucac	0.1417	−0.3482	−0.3695	−0.1004	0.0109	−0.0258	−0.1321	0.0645	0.0292	0.0001	1
dr	0.1235	0.0532	0.1312	0.335	0.0376	−0.0964	0.4749	0.3503	0.5542	0.2714	−0.0966	1
lfp	−0.2123	−0.2156	0.0845	0.0215	0.178	−0.1591	−0.0569	0.1349	0.1614	0.159	−0.0106	0.0388	1
infl	−0.1153	0.0825	−0.0173	−0.1222	−0.0843	0.1541	−0.0453	−0.0235	0.0562	−0.0179	−0.063	−0.0108	−0.0211	1
dcp	0.947	−0.0549	−0.1288	0.082	−0.1704	−0.3726	0.009	−0.046	−0.1281	−0.0555	0.2914	0.0802	−0.1598	−0.131	1
ndepo	0.1293	−0.2503	−0.2242	0.1193	−0.0318	−0.0851	0.0036	0.085	−0.0034	0.0935	0.6963	−0.0775	0.0039	−0.0761	0.2864	1
lr	−0.1721	0.1345	−0.1416	−0.1054	−0.1517	−0.0126	−0.0085	−0.0825	−0.0692	−0.0479	−0.0992	−0.0925	−0.0803	−0.0548	−0.1471	−0.0984	1
crop	0.1103	0.2442	−0.1441	0.2977	−0.1023	−0.2009	0.0947	0.0968	0.2719	0.241	0.0624	0.3385	0.0671	0.0006	0.1585	0.0093	−0.0858	1
gds	0.1136	−0.0094	0.0811	0.2841	0.001	0.0482	−0.0453	−0.1112	−0.136	−0.0366	0.0083	0.1947	−0.0289	−0.3797	0.1325	−0.0176	0.0012	0.1182	1
exp	0.0341	0.1243	0.1401	0.0145	0.0365	−0.0127	0.2437	0.3583	0.6497	0.2528	−0.0366	0.7506	0.0279	0.1283	0.0209	−0.0704	−0.07	0.3456	0.0094	1
tst	0.0764	−0.0323	0.0406	0.0176	0.158	−0.0075	0.1883	0.074	−0.0515	−0.1106	−0.1554	0.079	−0.0495	−0.4279	0.0719	−0.0418	0.0015	−0.1383	0.4153	0.0744	1

Source: Author’s Construct, (2022)

Table A3. Descriptive statistics

Code	Mean	Std. Dev.	Min	Max
gr	3.9	4.5	−12.4	14.0
infl	29.1	27.6	3.0	122.9
bm	34.8	14.3	10.0	68.5
cucac	−4.9	3.7	−12.5	3.1
dcp	8.5	4.5	1.5	15.9
debt	54.2	32.4	16.5	139.4
Debtser	3.9	2.6	0.8	10.8
Exp	24.4	11.3	3.3	48.8
Imp	32.6	17.0	3.0	67.2
Lit	45.3	14.5	33.3	77.7
Lr	25.3	10.0	8.5	47.0
Exp	24.4	11.3	3.3	48.8
Tst	0.4	0.3	0.0	1.3
Popgr	2.5	0.3	1.9	3.0
Infra	0.7	0.4	0.3	1.6
Popden	78.9	29.7	38.4	136.6

Source: Computed from, WDI (2022)

Table A4. PMP and MCMC of the best five models

Models	PMP (Exact)	PMP (MCMC)
0	0.7927238	0.7927238
1	0.07518887	0.07518887
2	0.0364156	0.0364156
4	0.02948613	0.02948613
8	0.02727873	0.02727873

Source: Author’s Construct, (2022)

Figure A1. Posterior model size distribution and model probabilities produced from the BMS package with “uniform” model priors.

Table A5. Bayesian model averaging results with “flexible” g-prior

Code	PIP	Post Mean	Post SD
DCP	1.000	0.031	0.002
INFL	0.809	−0.029	0.018
GDS	0.424	0.044	0.064
LFP	0.328	−0.004	0.008
POPGR	0.312	0.000	0.000
CUCAC	0.247	0.731	1.754
INFRA	0.226	0.030	0.080
CROP	0.194	0.010	0.036
LR	0.181	−0.309	0.992
MARCA	0.179	0.002	0.017
GDPPER	0.168	−0.335	2.119
CAF	0.157	0.000	0.023
IMP	0.153	0.006	0.028
TAXPR	0.147	0.004	0.018
TOS	0.140	−0.004	0.036
DR	0.131	0.002	0.028
BM	0.125	−0.002	0.075
LIT	0.113	6.107	56.103
ATAX	0.110	0.001	0.006
DEBTSER	0.099	−0.003	0.048
Exp	0.099	−0.002	0.018
TST	0.099	−0.006	0.327
PERCA	0.099	0.003	0.023
DEBT	0.091	−0.001	0.006
NDEPO	0.083	0.008	0.334

Source: Author’s Construct, (2022)

Table A6. Bayesian model averaging results with “hyper” g-prior

Code	PIP	Post Mean	Post SD
DCP	1.00	0.032	0.001
INFL	0.86	−0.032	0.017
GDS	0.38	0.040	0.061
LFP	0.29	−0.004	0.007
POPGR	0.24	0.000	0.000
CROP	0.19	0.574	1.548
INFRA	0.16	0.021	0.067
PERCA	0.15	0.008	0.030
CUCAC	0.14	0.005	0.027
LR	0.12	−0.204	0.805
TST	0.11	0.002	0.337
TAXPR	0.11	0.002	0.014
GDPPER	0.11	−0.234	1.655
DR	0.10	0.003	0.024
LIT	0.10	5.887	51.741
IMP	0.09	0.004	0.022
BM	0.09	−0.003	0.062
MARCA	0.09	0.001	0.012
DEBTSER	0.09	−0.002	0.042
TOS	0.08	−0.003	0.026
NDEPO	0.08	0.008	0.316
ATAX	0.07	0.000	0.004
CAF	0.06	0.000	0.014
Exp	0.06	−0.001	0.012
DEBT	0.05	0.000	0.005

Source: Author’s Construct, (2022)

Table A7. Bayesian model averaging results with “EBL” g-prior

Codes	PIP	Post Mean	Post SD
DCP	1.000	0.032	0.001
INFL	0.782	−0.029	0.018
GDS	0.420	0.044	0.063
LFP	0.337	−0.005	0.008
POPGR	0.312	0.000	0.000
CROP	0.188	0.547	1.516
PERCA	0.157	0.008	0.031
BM	0.127	−0.005	0.074
DR	0.120	0.002	0.025
LR	0.117	−0.200	0.798
TST	0.114	−0.001	0.340
CUCAC	0.113	0.004	0.025
INFRA	0.108	0.013	0.053
LIT	0.099	5.230	49.988
TAXPR	0.097	0.002	0.014
IMP	0.090	0.003	0.021
GDPPER	0.086	−0.204	1.525
MARCA	0.083	0.001	0.011
NDEPO	0.081	0.006	0.315
Exp	0.079	−0.001	0.014
ATAX	0.078	0.000	0.005
DEBTSER	0.077	−0.002	0.039
DEBT	0.068	0.000	0.005
TOS	0.064	−0.002	0.024
CAF	0.050	0.000	0.012

Source: Author’s Construct, (2022)