Advanced Search
MyIDEAS: Login to save this paper or follow this series

Financial development dynamic thresholds of financial globalization: evidence from Africa

Contents:

Author Info

  • Asongu Simplice

    ()
    (Yaoundé/Cameroun)

Abstract

Purpose – The issue of which financial initial conditions are necessary to materialize the benefits of financial globalization remains open to debate in the literature. In this paper, we try to put some empirical structure on the concept of financial threshold conditions in order to give policymakers guidance on the Kose et al. (2011) and Henry (2007) hypothesis. Its object is to assess if financial benefits of financial globalization are questionable until greater domestic financial development has taken place in African countries. Design/methodology/approach – In framing the financial dimension in a more concrete and tractable manner, we examine the concerns of how domestic financial initial dynamics of depth (economic and financial systems), efficiency (banking and financial systems), activity (banking and financial systems) and size, play out in the financial development benefits of financial globalization. The estimation approach consists of assessing the impact of financial globalization through-out the conditional distributions of domestic financial development dynamics. Findings – The introduction of previously missing financial dimensions into the debate generates a number of important findings. Only financial initial (threshold) conditions of size are necessary to materialize the benefits of financial globalization. While financial depth only partially validates the hypothesis, dynamics of efficiency and activity (credit) do not confirm the hypothesis. Practical implications – Addressing the issue of surplus liquidity in African financial institutions could improve the benefits of financial size and potentially reverse the trends of financial efficiency and activity. Depending on the context of sampled countries, the appropriate role of policy has always been either to stem the tide of capital flows or encourage them. Policymakers who have been viewing their challenges exclusively from the latter perspective for benefits in growth (finance) might be getting the financial dynamics badly wrong. Originality/value – Blanket financial development policies may not reap the financial benefits of financial globalization until domestic financial dynamics of depth, efficiency, activity and size are critically considered. The introduction of the last three previously missing components in the literature sheds more light on the globalization-development nexus.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.afridev.org/RePEc/agd/agd-wpaper/Financial-development-dynamic-thresholds-of-financial-globalization.-Evidence-from-African-countries.pdf
File Function: Revised version, 2013
Download Restriction: no

Bibliographic Info

Paper provided by African Governance and Development Institute. in its series Working Papers with number 12/020.

as in new window
Length: 36
Date of creation: 30 Jun 2012
Date of revision:
Publication status: Forthcoming in the Journal of Economic Studies
Handle: RePEc:agd:wpaper:12/020

Contact details of provider:
Email:
Web page: http://www.afridev.org/index.php/en/
More information through EDIRC

Related research

Keywords: Banking; International investment; Financial integration; Development;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Maurice Obstfeld, 2000. "The Global Capital Market: Benefactor or Menace?," International Finance, EconWPA 0004001, EconWPA.
  2. Boyd, John H. & Levine, Ross & Smith, Bruce D., 2001. "The impact of inflation on financial sector performance," Journal of Monetary Economics, Elsevier, Elsevier, vol. 47(2), pages 221-248, April.
  3. Simplice A, Asongu, 2012. "Fighting corruption in Africa: do existing corruption-control levels matter?," MPRA Paper 36900, University Library of Munich, Germany.
  4. 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, 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.
  5. Simplice A, Asongu, 2012. "Financial sector competition and knowledge economy: evidence from SSA and MENA countries," MPRA Paper 43009, University Library of Munich, Germany.
  6. Peter Blair Henry, 2006. "Capital account liberalization: theory, evidence, and speculation," Working Paper Series, Federal Reserve Bank of San Francisco 2007-32, Federal Reserve Bank of San Francisco.
  7. Huang, Yongfu & Temple, Jonathan, 2005. "Does External Trade Promote Financial Development?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5150, C.E.P.R. Discussion Papers.
  8. Eswar S. Prasad & Raghuram G. Rajan, 2008. "A Pragmatic Approach to Capital Account Liberalization," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 22(3), pages 149-72, Summer.
  9. Saint-Paul, G., 1990. "Technological Choice, Financial Markets and Economic Development," DELTA Working Papers, DELTA (Ecole normale supérieure) 90-30, DELTA (Ecole normale supérieure).
  10. M. Ayhan Kose & Eswar Prasad & Kenneth S. Rogoff & Shang-Jin Wei, 2006. "Financial Globalization: A Reappraisal," NBER Working Papers 12484, National Bureau of Economic Research, Inc.
  11. Peter Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Discussion Papers, Stanford Institute for Economic Policy Research 07-004, Stanford Institute for Economic Policy Research.
  12. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," NBER Working Papers 7265, National Bureau of Economic Research, Inc.
  13. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series, The World Bank 1678, The World Bank.
  14. M. Ayhan Kose & Eswar S. Prasad & Ashley D. Taylor, 2009. "Thresholds in the Process of International Financial Integration," NBER Working Papers 14916, National Bureau of Economic Research, Inc.
  15. Yongfu Huang, 2006. "Private investment and financial development in a globalized world," Bristol Economics Discussion Papers 06/589, Department of Economics, University of Bristol, UK.
  16. M.R. Mulwa & A. Emrouznejad & F.M. Murithi, 2009. "Impact of liberalization on efficiency and productivity of sugar industry in Kenya," Journal of Economic Studies, Emerald Group Publishing, Emerald Group Publishing, vol. 36(3), pages 250-264, September.
  17. Simplice A, Asongu, 2012. "The political economy of development assistance: peril to government quality dynamics in Africa," MPRA Paper 36543, University Library of Munich, Germany.
  18. Simplice A, Asongu, 2012. "Fighting corruption when existing corruption-control levels count : what do wealth effects tell us?," MPRA Paper 36901, University Library of Munich, Germany.
  19. H.M. Leung, 2003. "External debt and worsening business cycles in less developed countries," Journal of Economic Studies, Emerald Group Publishing, Emerald Group Publishing, vol. 30(2), pages 155-168, May.
  20. Simplice A, Asongu, 2012. "Fighting corruption when existing corruption-control levels count : what do wealth-effects tell us in Africa?," MPRA Paper 42180, University Library of Munich, Germany.
  21. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521608275.
  22. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, American Economic Association, vol. 90(2), pages 1-16, May.
  23. Greenwood, Jeremy & Jovanovic, Boyan, 1988. "Financial Development, Growth, And The Distribution Of Income," Working Papers, C.V. Starr Center for Applied Economics, New York University 88-12, C.V. Starr Center for Applied Economics, New York University.
  24. Magnus Saxegaard, 2006. "Excess Liquidity and the Effectiveness of Monetary Policy," IMF Working Papers, International Monetary Fund 06/115, International Monetary Fund.
  25. David Fielding, 1994. "Money Demand in Four African Countries," Journal of Economic Studies, Emerald Group Publishing, Emerald Group Publishing, vol. 21(2), pages 3-37, May.
  26. M. Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2006. "Financial Globalization," IMF Working Papers, International Monetary Fund 06/189, International Monetary Fund.
  27. Do, Quy-Toan & Levchenko, Andrei A., 2004. "Trade and financial development," Policy Research Working Paper Series, The World Bank 3347, The World Bank.
  28. Dwight Jaffee & Mark Levonian, 2001. "The Structure of Banking Systems in Developed and Transition Economies," European Financial Management, European Financial Management Association, European Financial Management Association, vol. 7(2), pages 161-181.
  29. Okada, Keisuke & Samreth, Sovannroeun, 2011. "The effect of foreign aid on corruption: A quantile regression approach," MPRA Paper 27969, University Library of Munich, Germany.
  30. Shady Kholdy & Ahmad Sohrabian, 2008. "Foreign direct investment, financial markets, and political corruption," Journal of Economic Studies, Emerald Group Publishing, Emerald Group Publishing, vol. 35(6), pages 486-500, November.
  31. Yongfu Huang, 2005. "What determines financial development?," Bristol Economics Discussion Papers 05/580, Department of Economics, University of Bristol, UK.
  32. Rodney Schmidt, 2001. "Efficient capital controls," Journal of Economic Studies, Emerald Group Publishing, Emerald Group Publishing, vol. 28(3), pages 199-212, September.
  33. Elisabeth Huybens & Bruce D. Smith, 1997. "Inflation, Financial Markets and Long-Run Real Activity," Working Papers, Centro de Investigacion Economica, ITAM 9707, Centro de Investigacion Economica, ITAM.
  34. Chien-Hsun Chen, 1996. "Regional determinants of foreign direct investment in mainland China," Journal of Economic Studies, Emerald Group Publishing, Emerald Group Publishing, vol. 23(2), pages 18-30, May.
  35. Aggarwal, Reena & Demirgüç-Kunt, Asli & Pería, Maria Soledad Martínez, 2011. "Do remittances promote financial development?," Journal of Development Economics, Elsevier, Elsevier, vol. 96(2), pages 255-264, November.
  36. Billger, Sherrilyn M. & Goel, Rajeev K., 2009. "Do existing corruption levels matter in controlling corruption?: Cross-country quantile regression estimates," Journal of Development Economics, Elsevier, Elsevier, vol. 90(2), pages 299-305, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:agd:wpaper:12/020. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Asongu Simplice).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.