Determinants of Financial Development in South Africa: The Role of Monetary Policy and Rule of Law

The aim of the thesis is to investigate the determinants of financial development for the case of South Africa between the period of 1996-2017 by adopting quarterly data. Johansen Cointegration test results suggest that there is a long run relationship among financial development, monetary policy, foreign direct investments (FDI), stock market capitalization, economic growth, and rule of law. Fully modified ordinary least squares (FMOLS) regression results indicate that monetary policy, rule of law, economic growth, FDI, and stock market capitalization have positive impacts on financial development. Results of the thesis reveal that monetary policy, FDI, stock market capitalization, economic growth and rule of law are the long run determinants of financial development in South Africa. This thesis can be a guideline for other emerging countries to create effective policies around financial development. Keywords: Financial development, rule of law, monetary policy, South Africa.