FINANCIAL STRUCTURE AND DYNAMIC INEQUALITY IN WAMZ COUNTRIES: AN EMPIRICAL ASSESSMENT USING THE P-VAR MODEL
Abstract
Dynamic inequality has been recognized as a significant barrier to the growth of developing countries, particularly in Africa. The disparities in economic outcomes among African nations are largely attributed to the varying levels of development and maturity in their financial systems. A robust financial system can foster financial inclusion and help reduce inequality and poverty. Over the years, the West African Monetary Zone (WAMZ) countries—Gambia, Ghana, Guinea, Liberia, Nigeria, and Sierra Leone—have experienced persistent dynamic inequality, leading to widespread multidimensional poverty.This study aims to investigate how different aspects of financial structure impact dynamic inequality in these WAMZ countries. It will examine three key dimensions of financial systems: bank-based structures, market-based structures, and overall financial stability. By analyzing annual data from 1993 to 2022 using the P-VAR methodology, the research will explore the relationship between financial development and dynamic inequality, guided by theoretical models that suggest financial development can mitigate inequality and promote growth, especially in the presence of financial frictions