*3.1. Preliminary Data Analysis*

#### 3.1.1. Summary of Descriptive Statistics and Correlations

Table 1 presents a summary of the descriptive statistics and correlations of West African region for the 1980–2014 period. It is shown that average real GDP per capita, credit to the private sector relative to GDP and liquid liabilities relative to GDP were USD566.73, 15.43% and 25.64%, respectively. It also indicates that the respective average real exchange rate and its volatility were 1144.3 and 61.67 during the period. There are wide variations among the variables as indicated by the standard deviations, which are highest in the real exchange rate, its volatility and GDP. The lower panel in Table 1 shows the correlation analysis, as financial development indicators and the control variables are positively correlated with GDP per capita, while real exchange rate, its volatility and inflation rate are negatively related to GDP per capita. Moreover, real exchange rate and its volatility are negatively related to financial development.


**Table 1.** Summary of descriptive statistics and correlations.

Notes: \*\*\* and \*\* indicates statistically significant at 1% and 5%, respectively. Y = real GDP per capita, CPS = credit to the private sector relative to GDP, LLY = liquid liabilities relative to GDP, GOV = governmen<sup>t</sup> consumption expenditure relative to GDP, TOP = trade openness relative to GDP, HCA = human capital, INF = inflation rate, RER = real exchange rate, RERV = real exchange rate volatility.

#### 3.1.2. Panel Unit Root Tests

We conduct unit root tests using the traditional panel data unit root tests (that assume homogeneity or account for heterogeneity) developed by Im et al. (2003); Levin et al. (2002) and Maddala and Wu (1999) as well as the Pesaran (2007) panel data unit root test that accounts for cross-sectional dependence. The results reported in Table 2 show that all the variables in the model are I(0) except GDP per capita, credit to the private sector, liquid liabilities and human capital, which are I(1). This implies that the variables in the model are a mixture of I(0) and I(1) processes, and the appropriate technique would be the ARDL approach.


**Table 2.** Panel unit root tests.

Notes: \*\*\*, \*\* and \* indicates statistically significant at 1%, 5% and 10%, respectively, and a rejection of null hypothesis of unit root. Δ = first differenced notation, ADF-Fisher = Augmented Dickey Fuller-Fisher test, LLC = Levin et al. (2002), IPS = Im et al. (2003), Pesaran = Pesaran (2007) test. Y = real GDP per capita, CPS = credit to the private sector relative to GDP, LLY = liquid liabilities relative to GDP, RER = real exchange rate, RERV = real exchange rate volatility, GOV = governmen<sup>t</sup> consumption expenditure relative to GDP, TOP = trade openness relative to GDP, HCA = human capital, INF = inflation rate.
