Financial Development and Economic Growth: Evidence from Low-Income Nations in the SADC Region
Round 1
Reviewer 1 Report
Comments and Suggestions for Authors
Review on ijfs-2658005: Financial Development and Economic Growth: Evidence from Low-Income
Nations in The SADC Region
Overall evaluation: The paper is reflective of some understanding of the main concepts under consideration, although not entirely convincing. The author(s) make a compelling argument on the importance of financial development for low-income countries, not only in the SADC region, but globally too. Although a fair attempt was made herein, the paper was found to have a number of flaws, which is corrected, can improve the paper.
abstract:
· While the abstract provides a concise synopsis of the paper, it would be more value-adding for the author(s) to be more specific on the how governments can actually “create environments that foster financial development”. The closing sentence in the abstract is just a sweeping statement with no impact unless specific action is spelt out. Why shy away from stating recommendations?
introduction:
· The background information provided reads more like the literature review already (and even by the author’s own admission in Lines 96 and 97). There is insufficient context provided with regard to the choice to focus on the low-income countries in SADC.
· Similarly, although there are numerous definitions of financial development provided, one would expect that a working definition for the purposes of this study is provided so that readers know the author(s)’ angle.
· The introduction pays an unbalanced focus on financial development over economic growth, yet both a key concepts in the study.
· There is no mention of which countries are considered to be low-income countries in the SADC region, throughout the entire paper. This background detail is necessary for holistic contextualisation.
· With reference to financial development, it would be prudent for the author(s) to delve further and articulate whether they assessed bank-based or market-based driven financial development. This is important because of the nature of the financial systems in Africa, in general. This clarity is necessary. It is further concerning as there are sweeping and misleading statements made in this regard – see Lines 98 and 99.
· In the introduction closing statement (Lines 100 to 102), the author merely re-states the title as “In light of this, this study sought to investigate the relationship between financial development and economic growth in the SADC region”. Yes, that is the overall aim of the study but what are the more specific objectives, and what is the end expectation? You investigate the relationship, and then what?
Literature review:
· In 2.2.2, there is a list of bullets which have a full stop before the numbering, e.g. .(i). Am not sure if this was intentional or a typo.
· While appreciating the fair effort made in the presentation of the empirical evidence, it is merely a compilation of various existing scholarly works. It lacks any form of critical analysis; the author’s voice is completely missing, and this defeats the purpose of undertaking a literature review.
· This section therefore needs major revision.
Soundness of data and methodology:
· The abstract demarcates the study period as 2000-2022, yet the methodology states a period running from 2000-2021. Which is which?
· The justification given for the choice of period is very weak, and becoming pretty standard, i.e. The reason the study chose this period is due to data availability. Surely there are other compelling reasons that can be advanced for this choice. Why not look at when most of the countries under study established stock markets, for instance, as this is a determinant of the level of financial development.
· What was the population size? What was the eventual sample comprised of? Selected on what basis? This is pertinent information.
· In line 243, there is a variable that is described, yet it does not appear in the model on Lines 238 to 239. This variable is “GE is General government final consumption expenditure”.
· Why is the model in line 238 to 239 labelled (ii) yet it is the 1st equation in the paper? The rest of the models are also incorrectly labelled.
· The term “𝜇I,t” is not defined in the 1st model.
· The variables in Table 1 do not tally with the variables specified in the model in Lines 238 to 239. For instance, we now are introduced to Broad Money (BM) as a variable.
· There is no explanation as to the compilation of the financial development index. What method and variables were used to come up with this index?
· The model specified in Line 311…the variables need to be defined in full. For instance, the author states “𝑋𝑖𝑡 shows combination of other explanatory variables”; but there is already a question mark on the variables included in the previous model on lines 238 and 239; moreso where the financial development index is concerned, and the phantom variable – Broad Money (listed in table 1 only).
· the adopted methodology needs to be revised as it is currently very confusing, and missing some key aspects, e.g. composition of the financial development index.
Results:
· Considering the confusion already experienced from the methodology section, I am reluctant to consider the results as there are too many red flags. Nonetheless, I will proceed.
· In Table 2, where did we suddenly get introduced to the variable “FDINV”? We still have the BM variable, but the previous GE variable seems to have been dropped.
· I still need to know what variables were used to develop the financial development index.
· Due to the nature of the variables, please can you run and include a correlation analysis, so that we can assess that indeed there is no issues of collinearity here. I suspect multicollinearity but can only rule that out upon seeing the actual results for this. As things stand, some of these results appear spurious.
· Why is there no consistency across the tables with regard to the variables? In table 5, BM is dropped and GE is reintroduced. However, the greater concern is that in the explanation of these findings in lines 413 and 414, the author states “Results displayed in Table 5 show that three variables (REM, INF and GE) were stationary at levels. The other four variables were not stationary at levels”. Which other four variables are these when the table reflects a total of 6 variables, so if 3 are stationary at levels, that would leave only 3 others.
· Is broad money are good indicator of or proxy for financial development?
· I have still not seen anywhere in this paper which alludes to the composition of the applied financial development index used in this study.
· Please correct the spelling of “borad money” in Line 581.
Discussion and conclusion:
· The entire 1st paragraph in the paragraph is exactly what was copied and pasted as the paragraph and this is really unacceptable. Granted we all suffer from fatigue at this point of writing a paper, but this kind of repetition does not bode well for a scholarly paper. This paragraph must be re-written in its entirety.
· The second paragraph in the conclusion is supposedly the recommendations. They are very weak, general sweeping statements. Why can the author not be more specific and recommend that countries should consider how they regulate their financial markets for instance, as this has a bearing on inward foreign capital flows for instance, which can be used to complement domestic savings efforts. This is really one of the main reasons why I have been insisting that we get clarity on which countries were assessed, and whether they are bank-based or market-based financial systems in those respective countries.
Other corrections to be effected:
· The list of references needs to be revised as there are some errors, e.g.
o The 1st listing includes a full first name instead of initials only
o Listed twice:
§ Adu, G., Marbuah, G and Mensah, J. 2013. Financial development and economic growth in Ghana: Does the measure of financial development matter?
§ Ahmad, M and Islam, T. 2022. A Causal Analysis of Financial Development and Economic Growth
§ And many others. Please revisit the entire list.
Comments for author File: 
Comments.pdf
Comments on the Quality of English Language
The quality of English is acceptable, although there are some minor errors to be addressed.
Author Response
see the attached item.
Author Response File: Author Response.pdf
Reviewer 2 Report
Comments and Suggestions for Authors
The manuscript presents an analysis of a relevant topic. The introduction is adequate, commenting on important aspects of the existing literature, but the contribution and objectives of this research could be better developed.
The literature review is sufficient and adequately referenced. The methodology is well explained and developed.
The results are presented with a good level of detail, although they do not go into too much depth and there are too many very brief subsections. The discussion is somewhat sparse, although it is well related to previous literature. Some implications of the results could be developed further, helping to highlight the main contributions of the work. However, the conclusions are too shallow and do not make clear the contribution of this work to its field of study, as well as whether the proposed objectives have been achieved. They should be reworded almost completely to enhance the previous work. In addition, the wording is somewhat reiterative (for example, the words "the study" are repeated several times in the beginning of consecutive sentences). The same is true of the summary since it is practically identical in many of its parts. Both parts of the text should be improved.
In lines 132, 136 and 143, in the enumeration, punctuation marks appear that should not be there.
There is a formatting problem with the equation specified in line 238 that is repeated in the following lines (ellipses after the equation up to the equation number).
In table 2 the minimum values are missing.
In table 5 there are extra spaces in the first data cell.
The format of table 7 breaks radically with the rest of the document. Evaluate if it is appropriate. The font size is excessive.
In general terms, the wording of the text could be improved to make it more coherent. The manuscript seems to be composed of paragraphs written independently, which leads to multiple reiterations, both in words and structures. Too many sentences begin with the word "the," giving a somewhat sloppy writing feel. The word "study" appears 44 times in the text.
Author Response
see the attached item
Author Response File: Author Response.pdf
Reviewer 3 Report
Comments and Suggestions for Authors
The manuscript addresses an important issue and would be a valuable addition to the literature. However, the econometric analysis is either incorrect or misrepresented. The author conducts unit root tests which show that GDP and other explanatory variables are non-stationary. For this reason, the author states that "These variables were first differenced in order for them to become stationary." (pg. 9-10). This is the correct procedure. However, all the remaining analysis is presented in terms of the variables in levels. There does not seem to be an analysis in first differences at all. If there was one, the equations presented and the tables should have reflected that. In summary, the econometric model are being presented in the tables does not match what the author states on pg. 9-10.
Author Response
see the attached report
Author Response File: Author Response.pdf
Round 2
Reviewer 1 Report
Comments and Suggestions for Authors
Although the author attended to most of the concerns previously raised, I am not sure why the duplications and errors in the list of references at the end was left unaddressed. References are a pertinent part of scholarly writing and must adhere to the journal's quality and standards.
Author Response
We are sorry about that. we have since amended the references. We thought we were going to correct them during the production process. But we have managed to remove all duplications. Some errors will be corrected during the proof reading process. Thank you.
Reviewer 3 Report
Comments and Suggestions for Authors
There are a few small issues that I have commented on in the file attached. The main issue concerns the discussion of the results. All the references in the section below the table of results read like a literature review. I would have expected a discussion of how the results of your econometric analysis compare with those of the literature. There is no such discussion.
Comments for author File: Comments.pdf
Author Response
We managed to make correction to all issues that were raised on the pdf document. For example the statistical properties of the error term were added. The equation 1 was also corrected. All other grammatical errors were corrected.
Author Response File: Author Response.pdf
