International debates on the effects of financial integration are ongoing
(Chen and Quang, 2012; Edison et al., 2002; Schularick and Steger,
2010). On the other hand, evidence of growth benefits from (international)
financial integration based on cross-section studies has been
inconclusive (Thaicharoen et al., 2007).2 It has also been argued that
growth benefits of financial openness are conditional on differences in
institutional quality and macroeconomics policy settings (Thaicharoen
et al., 2007). It is also important to mention that there are very limited
studies on SADC and SACU member states (whether individual or
group) on the impact of international financial integration. Despite
there being numerous empirical studies, the growth benefit of financial
integration has remained unresolved, especially from the perspective
of developing countries. The aim of this paper is to examine whether
financial integration helps foster economic growth in Botswana. Secondly,
the research aims to investigate whether there are some indirect
channels through which international financial integration acts as a
catalyst for further financial market development and economic
performance. Thirdly, given that Botswana is one of the fastest growing
economies in the region, we believe it will make a prime case study to
observe the impact of financial integration developments and investigate
whether such financial integration-growth links are conditional
upon other economic characteristics. Finally, unlike other African
countries, Botswana has undertaken ambitious and targeted economic
liberalisation reforms to promote the private sector and achieve
economic diversification in the last two decades. Thus, due to improvement
in data availability, this study which evaluates the benefits from
financial integration is timely.