Bank Efficiency and Openness in Africa: Do Income Levels Matter?
AbstractThis paper integrates a previously missing wealth-effect component in the openness-finance debate. From a panel of 29 low and middle income African countries with data spanning from 1987 to 2008, we provide evidence that openness (trade and financial) triggers less bank efficiency in low income countries than in their middle income counterparts. These findings justify the absence of a banking comparative advantage and consequently, the issue of over-liquidity resulting from low funding of economic operators with mobilized financial deposits. In terms of policy implications, globalization increases economic cost of banks in sampled countries, with trade openness more detrimental than financial openness. Banks in middle income countries play a greater role in financing activities resulting from trade openness than those in low income countries. Also, a lot needs to be done on the improvement of infrastructures that curtails information asymmetry in the banking industry.
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Bibliographic InfoPaper provided by African Governance and Development Institute. in its series Working Papers with number 10/001.
Date of creation: 15 Dec 2010
Date of revision: 18 Dec 2011
Banking; Intermediation Efficiency; Openness; Panel Data; Africa;
Other versions of this item:
- Simplice Anutechia Asongu, 2012. "Bank Efficiency and Openness in Africa: Do Income Levels Matter?," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 4(2), pages 115-122, December.
- Simplice A, Asongu, 2010. "Bank efficiency and openness in Africa: do income levels matter?," MPRA Paper 27011, University Library of Munich, Germany.
- F10 - International Economics - - Trade - - - General
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
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