Financial Development, Human Capital and Economic Growth in the UEMOA

The triangle of financial development, human capital and economic growth is a combination used in this paper to show a stimulating impact on improving the economy in the West African Economic and Monetary Union. The aim of this thesis is to show that human capital has a positive impact on growth by stimulating financial development. Three tests were used to demonstrate this triangle. Using a panel VAR model for annual data from 1995 to 2013, the first test shows that the primary school enrolment rate and health spending significantly influence the development of the financial system in the union. The second test shows that primary school enrolment and health expenditure have no significant effect on growth. However, analysis of the variance decomposition shows that there is a weight of around 1% to 3% between human capital variables and growth. The third test shows the positive and significant impact of human capital on growth through the financial development channel, as well as the impact of financial development on growth through the human capital channel.