European Journal of Accounting, Finance and Investment

Macroeconomic Determinants Of Financial Intermediation In Ecowas: Panel Evidence

Prof. Jegede, Charles Ayodele

Department of Finance, Lagos State University, Ojo, Lagos, Nigeria.

Eke, Patrick Omoruyi PhD

Department of Finance, Lagos State University, Ojo, Lagos, Nigeria.

Owolabi, Olasunkanmi Femi

Department of Finance, Lagos State University, Ojo, Lagos, Nigeria.

Keywords: Financial intermediation, Macroeconomic variables, ECOWAS, Panel ARDL, Pooled Mean Group

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Abstract

This study examines the impact of selected macroeconomic variables on financial intermediation in the Economic Community of West African States (ECOWAS) using panel data from ten member countries over the period 1997–2024. Financial intermediation is proxied by credit to the private sector, while key macroeconomic variables include interest rate spread, gross national savings, broad money supply, and economic growth. Employing a Panel Autoregressive Distributed Lag (ARDL) framework with Pooled Mean Group (PMG) and Mean Group (MG) estimators, the study investigates both short-run dynamics and long-run relationships among the variables. The results reveal the existence of a long-run cointegrating relationship between macroeconomic variables and financial intermediation in ECOWAS. Broad money supply emerges as the most significant determinant of financial intermediation in the long run, while interest rate spread and national savings exhibit weak and mixed effects. The error correction term is negative and statistically significant, confirming a stable long-run equilibrium relationship. These findings underscore the importance of macroeconomic stability and monetary deepening in enhancing financial intermediation in the ECOWAS region. The study provides relevant policy implications for monetary authorities and financial sector regulators seeking to strengthen financial intermediation and promote sustainable economic growth in West Africa.