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How can economic and political liberalisation improve financial development in African countries?

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Author Info

  • Michael Enowbi-Batuo
  • Mlambo Kupukile

Abstract

Purpose – The objective of this paper is to study the interactions between economic liberalisation, political liberalisation, and financial development in African countries. More specifically, the paper seeks to establish the impact of economic, political, and institutional openness on financial deepening. Design/methodology/approach – In the empirical part, the paper proposes a two-step procedure which involves the treatment effect and the new panel studies technique of recently updated data for economic and political reform. Findings – The results show to what extent political liberalisation, economic liberalisation, and the stability of the political system have a statistically significant effect on the financial development of the continent, showing that reform, stability, and democratic rule seem to be favourable for development of the financial sector in the continent. Originality/value – There are few studies that directly explore the link between political and economic liberalisation on financial development. The difference between this paper and other studies is that first, it is restricted to African countries, those that have been mostly undergoing the two types of reform (political and economics). The second reason is that most of the previous papers always took into consideration the effects of financial development on one of the reforms either political or economic, meanwhile in this paper, the author considers the various aspects of reform: political, economical, and the stability of the environment.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Journal of Financial Economic Policy.

Volume (Year): 2 (2010)
Issue (Month): 1 (May)
Pages: 35-59

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Handle: RePEc:eme:jfeppp:v:2:y:2010:i:1:p:35-59

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Related research

Keywords: Africa; Economic conditions; Economic development; Politics;

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References

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  1. Elias Papaioannou & Gregorios Siourounis, 2008. "Democratisation and Growth," Economic Journal, Royal Economic Society, vol. 118(532), pages 1520-1551, October.
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Citations

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Cited by:
  1. R.W. Hafer, 2013. "Economic Freedom and Financial Development: International Evidence," Cato Journal, Cato Journal, Cato Institute, vol. 33(1), pages 111-126, Winter.
  2. Batuo Enowbi, Michael & Kupukile, Mlambo, 2012. "Financial instability, financial openness and economic growth in african countries," MPRA Paper 43340, University Library of Munich, Germany.
  3. Enowbi Batuo, Michael & Asongu, Simplice A., 2012. "The impact of liberalisation policies on income inequality in african countries," MPRA Paper 43344, University Library of Munich, Germany.

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