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Governance and financial development: does financial openness matter? Evidence from Sub-Saharan African countries

Author

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  • Samuel cédric Nkot

    (University of Garoua; Advanced School of Economics and Business)

  • Sezard Timbi

    (University of Garoua; Faculty of Economics and Management)

Abstract

The objective of this study is to assess the mediating role of financial openness in the relationship between governance and financial development for 27 sub-Saharan African countries. To this end, the methodology used is based on the Generalized Method of Moments in System over 2000 to 2019. The following results are established. (i) total governance has unconditional positive and significant effect on financial development; (ii) Financial openness hinders the effect of governance on financial development; (iii) There is negative marginal and positive net effects from the interaction between total governance and financial openness; (iv) Policy thresholds at which the modulating variable reverses the net effect on financial development from negative to positive is 0.252 financial openness. These results, which are robust to an alternative measure of financial openness, call on policymakers to improve the quality of the institutional environment in the context of financial system modernization and to adopt adequate macroeconomic policies to ensure the success of international financial openness.

Suggested Citation

  • Samuel cédric Nkot & Sezard Timbi, 2023. "Governance and financial development: does financial openness matter? Evidence from Sub-Saharan African countries," Economics Bulletin, AccessEcon, vol. 43(1), pages 471-483.
    • Handle: RePEc:ebl:ecbull:eb-22-00350
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    More about this item

    Keywords

    Governance; financial development; financial openness;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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