Privatisation versus Regulation in Developing Economies: The Case of West African Banks
AbstractThis paper builds on the case of West African banks to propose an analysis of the issues raised by government interference, privatisation to foreign investors and regulation in developing countries. In the late 1980s, there was a severe crisis in the West African banking system, partly due to government interference. The restructuring of the banking system entailed privatisation and foreign share ownership. During the 1990s, both foreign ownership and the proportion of bad loans went down. We offer an interpretation of these stylised facts within the framework of a simple model where non-benevolent governments are prone to political interference, as long as it does not generate too large expected social costs, and learn to refrain from interference after severe crises. Privatisation to foreign investors seeking high return and high risk does not always ensure efficiency of the banking system, while regulation by independent agencies can be more effective. Further confrontation of the theory to the data is provided by panel regressions on profits, bad loans and ownership ran across the seven countries of the West African Economic and Monetary Union from 1990 to 1997. Copyright 2004, Oxford University Press.
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Bibliographic InfoArticle provided by Centre for the Study of African Economies (CSAE) in its journal Journal of African Economies.
Volume (Year): 13 (2004)
Issue (Month): 3 (September)
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- Jean Paul Azam & Bruno Biais & Magueye Dia, 2000. "Privatization versus regulation in developing economies: The case of West African banks," William Davidson Institute Working Papers Series 315, William Davidson Institute at the University of Michigan.
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- Azam, Jean-Paul & Dia, Magueye, 2004. "Pro-Poor Growth in Senegal," IDEI Working Papers 325, Institut d'Économie Industrielle (IDEI), Toulouse.
- Azam, Jean-Paul & Dia, Magueye & Tsimpo, Clarence & Wodon, Quentin, 2007. "Has Growth in Senegal After the 1994 Devaluation Been Pro-Poor?," MPRA Paper 11110, University Library of Munich, Germany.
- Patrick Honohan & Thorsten Beck, 2007.
"Making Finance Work for Africa,"
World Bank Publications,
The World Bank, number 6626.
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