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Bond market development and infrastructure-gap reduction: The case of Sub-saharan Africa

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  • Kodongo, Odongo
  • Mukoki, Paul
  • Ojah, Kalu

Abstract

Infrastructure development and it's financing have featured jointly in the economic development discourse. We consider the linkages between the two in the African context by examining the potential role of the region's fledgling bond markets in mobilizing resources to bridge its notorious infrastructure gap (IG). Applying a battery of econometric tests on 40 countries covering 2003–2018, we document robustly negative and nonlinear relationships between bond market development and IG (and, by extension, infrastructure financing deficit). Furthermore, these fledgling government and corporate bond markets play a complimentary role in financing vital infrastructures; with corporate bond markets interestingly eliciting greater reduction in IGs than government bond markets. In the future, African governments should implement policies that promote the development of both sovereign and corporate bond markets, with a strategic emphasis on quickly deepening corporate bond markets to facilitate more impactful financing of infrastructures.

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  • Kodongo, Odongo & Mukoki, Paul & Ojah, Kalu, 2023. "Bond market development and infrastructure-gap reduction: The case of Sub-saharan Africa," Economic Modelling, Elsevier, vol. 121(C).
    • Handle: RePEc:eee:ecmode:v:121:y:2023:i:c:s0264999323000421
    DOI: 10.1016/j.econmod.2023.106230
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    More about this item

    Keywords

    Public debt markets; Infrastructure gaps; Infrastructure financing; Sub-Saharan Africa;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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