Financial development, economic growth and millennium development goals in South Africa

Purpose – The purpose of this paper is to empirically report the findings on the relationship between financial sector development, economic growth and of millennium development goals (MDGs) for poverty reduction, education and health development in South Africa. Design/methodology/approach – The autoregressive distributed lag bounds testing technique was applied to two indicators of financial development, economic growth and four indicators of MDGs. Findings – Economic growth and MDGs jointly cause financial development. Similarly, economic growth and financial sector development jointly cause the attainment of MDGs. The attainment of MDGs such as increased per capita expenditure on food and education as well as economic growth jointly cause financial development. Practical implications – The findings highlight the complexity of the relationship between financial development, economic growth and MDGs. It is essential that the government of South Africa pursue a three track strategy of promoting financial sector development, economic growth and MDGs. The development of one strategy causes and is caused by the development of the other two. Originality/value – Relationships between financial development, economic growth and MDG targets are unsettled in the literature. This paper studies the link between the three variables in South Africa. Hence, the contribution of this study is to enrich the understanding of this important field in the context of an important African country.