The Relationship among Human Capital, Financial Development and Economic Growth: Panel VARX Evidence from ECOWAS Countries

This paper analyses the relationship among economic growth, financial development, and human capital for 14 ECOWAS countries from 1970 to 2021 years using panel VARX. Results suggested evidence of bidirectional causality between money supply and life expectancy at birth and unidirectional causality running from GDP to domestic credit, education human capital to GDP, money supply to GDP, health human capital to domestic credit, and domestic credit to broad money. Overall, financial development, as measured by broad money, hurt economic growth, while when measured by domestic credit, it had a positive but statistically insignificant effect on growth. Education human capital did have a positive impact on GDP, while health human capital impact on GDP was also positive but statistically insignificant. Also, health human capital interacted positively with financial development irrespective of the proxy used, but education human capital had no statistically significant interaction with any financial development measures. Economic growth has a significant positive impact on financial development through domestic credit, but has a positive insignificant impact on money supply and human capital.