Author(s): Ch. Paramaiah and Pranav Kumar
In this paper, an attempt has been made to assess the relationship between financial integration and economic growth in the Southern African Development Community (SADC). The nexus between financial integration and economic growth works through several channels such as enabling the flow of funds across countries. This flow of funds augments the pool of available domestic savings. The financial integration is able to spur economic growth, therefore, several countries have adopted financial integration agendas in order to boost growth. The empirical evidence on the effects of financial integration on economic growth is not conclusive. In this paper, a modest attempt has been made to investigate relationship financial integration and economic growth in the SADC region. This study employed the Chin-Ito index and the ratio of Foreign Direct Investment (FDI) to Gross Domestic Product (GDP) to measure financial integration in the SADC region. The results reveal that there is a positive and statistically significant relationship between financial integration and economic growth in the SADC countries. The findings, therefore, underscore the need for SADC to engage in policies that would position SADC as the preferred destination for FDI.