Nonlinear Dynamics of the Financial–Growth Nexus in African Emerging Economies: The Case of a Macroprudential Policy Regime
Round 1
Reviewer 1 Report
- The motivation for the paper is not clear. The authors claim that the paper is due to lack of studies that investigate non-linearity between finance and economic growth, especially in developing countries. However, even the cited references in the paper contradict that. For example, Ibrahim and Alagidede's paper is both about the non-linearity between economic growth and finance and in sub-Saharan African countries. So, what is it that the authors are now adding to the literature?
- The modelling is too mechanical and is not related to the objectives. Why is it been adopted? How does it differ from others? How would it help unearth new evidence and new contributions? These should have been explained and demonstrated in the paper.
- Although, in view of the above comments, I am not sure about the reliability of the reported results, but they should have been explained within the context of the theories and extant literature.
- The presentation requires a lot of improvements: language, grammar checking as well as the tables and equations presentation. Thus, the paper requires thorough proof-reading.
Author Response
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Author Response File: 
Author Response.pdf
Reviewer 2 Report
This study is very well written and structured, in addition to being very interesting.
However, some improvements are lacking:
- The abstract must include the originality of this study;
- Many results are obtained but the discussion is not consistent. Thus, the discussion of results should be reviewed with reinforcement of evidence from studies reviewed in the literature review section.
- In the conclusion, limitations and future lines of investigation must be presented.
Author Response
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Author Response File: Author Response.pdf
Reviewer 3 Report
The paper is an empirical exercise that utilises panel data models for 10 African countries in order to examine the role of financial development on economic growth (a very well documented and examined relationship in the literature). The author(s) claim that the innovative idea of their paper is the connection to macroprudential policy regimes that started being applied to African countries after 2000 and they want to see how this policies affect this relationship. The idea/concept is sound, and it has merits. However, the execution of the empirical analysis, the writing of the methodology and the discussion of the results are not suggesting a good paper that merits publication. The paper needs major restructuring and re-writing prior to publication. The empirical analysis is not persuasive at all and the results do not seem to suggest what the authors conclude (or at least they do not explain it adequately). For example if there is a U-shaped relationship, the level of 60.5% that found to be optimal(?) according to the authors, is not really optimal. This is because if African countries have a level of financial development which is higher than 60.5% then they achieve higher growth! So, this is a saddle point that shows that for lower values growth is hindered and for higher values growth is promoted. What is the upper limit of this... nobody knows. The author(s) have nothing to suggest rather than do the policies only when the financial development index is higher than 60.5%. This finding (useful as it may be) needs to be written in a better manner. This finding does not contradict only the Greenwood and Jovanovic hypothesis... but also many other recent empirical papers, that find the exact opposite (which makes much more sense) i.e an inverted U-shaped curve. This finding is well documented by Arcand, Berkes and Panizza (2012), (they talk about "too much finance") which is not discussed at all in the paper.
The paper has many weak points... I will mention a few to help the author(s) but a major rewriting of the paper is certainly needed prior to any other attempt for publication.
1) It is not good practice to have a reference to other papers in the abstract.
2) The literature review fails to discuss the newest developments on the finance and growth nexus (see for example Asteriou and Spanos, (2018) among many others).
3) The description of the data needs to become clearer. Some summary stats will help. Why INV and TR are not measured as %GDP, while all others are ratios? Surely, there are some non-stationarity problems in those panels.
4) page 274, what do you mean that growth(it) is a scalar?
5) page 284, c(j) the j should be subscript for sure. very slopy
6) page 285 the "which" is not needed. There are problems with grammar/syntax all over the paper.
7) page 294, where does this I[A] comes from? It appears out of nowhere. The model is not nicely explained.
8) page 299, β(0), the 0 should be subscript... If β(0)x(it) is supposed to denote a sequence of all the variables then matrix notation is needed here. β(0) should have a prime as well. This is so badly presented.
I stop here with the maths of the model, that are all over the palce.
9) pages 308-311, your discussion of choice of m does not make sense.
10) Table 1 the results are badly presented. Why bold only for m=1, the p-values suggest statistical significance everywhere...What is WB and WCB. You have not introduced them yet...
11) Table 2, now you introduce WB and WCB and you do a different test for linearity, but you show exactly the same numbers as table 1 (it is just that you took out lines for 2 and 3 lags). Is that proper??? It looks rather weird. Why do we need two tests that are supposed to be different, if they are the same....
12) there are no P-values, only p-values. Change this everywhere in the text and the tables.
13) page 589, finding that inflation promotes growth is surely puzzling. You need to explain this better and not just say it as it is something natural. What is the policy implication here? Can you tell governments increase inflation and growth will come...? At what cost?
Asteriou, D., and Spanos, K. (2018), "The relationship between financial development and economic growth during the recent crisis: Evidence from the EU", Finance Research Letters, https://doi.org/10.1016/j.frl.2018.05.011
Author Response
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Author Response File: Author Response.pdf
Round 2
Reviewer 1 Report
- Unfortunately, the authors have not undertaken the corrections suggested and as a result, the paper is only slightly improved over the original submission. In addition to the previous comments, the authors need to address, among others, the followings.
- The paper is still difficult to read and follow the arguments.
- The tables are still looking unprofessional and unconventional.
- Dates are not added to authors' names in citation.
- The methodology section is unnecessarily too long, regurgitating the literature.
Author Response
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Author Response File: Author Response.pdf
Reviewer 2 Report
The authors made all sugestions.
Author Response
There was no comments
Reviewer 3 Report
No further comments. They have addressed all issues.
Author Response
There was not comments
