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

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  • 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.

Suggested Citation

  • Michael Enowbi‐Batuo & Mlambo Kupukile, 2010. "How can economic and political liberalisation improve financial development in African countries?," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 2(1), pages 35-59, April.
    • Handle: RePEc:eme:jfeppp:v:2:y:2010:i:1:p:35-59
    DOI: 10.1108/17576381011055334
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    More about this item

    Keywords

    Economic conditions; Politics; Economic development; Africa;
    All these keywords.

    JEL classification:

    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • G2 - Financial Economics - - Financial Institutions and Services
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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