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Financial Deepening in the CFA Franc Zone:The Role of Institutions

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  • Dhaneshwar Ghura
  • Kangni Kpodar
  • Raju Jan Singh

Abstract

During the 1980s and early 1990s many Sub-Saharan African (SSA) countries undertook reforms to promote financial sector deepening. Nevertheless, financial sectors in SSA countries remain among the shallowest in the world and, within Sub-Saharan Africa, financial depth in the CFA franc zone is even more limited. This paper sets out to investigate empirically factors that may explain why financial depth in the CFA franc zone is shallower than in the rest of SSA using panel data for a sample of 40 countries for 1992-2006. The results indicate that the gap in financial development between the CFA franc zone countries and the rest of SSA can be explained by differences in institutional quality (e.g., availability of credit information, and strength and enforcement of property rights), variables that policy makers can influence.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/113.

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Length: 17
Date of creation: 01 May 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/113

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Related research

Keywords: Credit policy; Economic models; Financial sector; Governance; property rights; financial liberalization; financial markets; financial system; legal institutions; international financial statistics; courts; legal systems; deposit rates; financial sector development; court; financial sector performance; legal rights; financial market; deposit money; reserve requirements; financial services; financial structure; interest rate ceilings; common law; financial reform; financial institutions; deposit money banks; financial statements; judicial framework; judicial systems; financial systems; civil law; court proceedings;

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References

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  1. Daron Acemoglu & Simon Johnson, 2003. "Unbundling Institutions," NBER Working Papers 9934, National Bureau of Economic Research, Inc.
  2. Simeon Djankov & Caralee McLiesh & Andrei Shleifer, 2005. "Private Credit in 129 Countries," NBER Working Papers 11078, National Bureau of Economic Research, Inc.
  3. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  4. Thierry Tressel & Enrica Detragiache, 2008. "Do Financial Sector Reforms Lead to Financial Development? Evidence From a New Dataset," IMF Working Papers 08/265, International Monetary Fund.
  5. Bester, Helmut, 1987. "The role of collateral in credit markets with imperfect information," European Economic Review, Elsevier, vol. 31(4), pages 887-899, June.
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  7. Elisabeth Huybens & Bruce D. Smith, 1997. "Inflation, Financial Markets and Long-Run Real Activity," Working Papers 9707, Centro de Investigacion Economica, ITAM.
  8. Bester, Helmut, 1985. "Screening vs. Rationing in Credit Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 75(4), pages 850-55, September.
  9. Elisabeth Huybens & Bruce D. Smith, 1996. "Financial Market Frictions, Monetary Policy and Capital Accumulation in a Small Open Economy," Working Papers 9608, Centro de Investigacion Economica, ITAM.
  10. Ivanna Vladkova Hollar & Giovanni Dell'Ariccia & Carlo Cottarelli, 2003. "Early Birds, Late Risers, and Sleeping Beauties," IMF Working Papers 03/213, International Monetary Fund.
  11. Boyd, John H. & Levine, Ross & Smith, Bruce D., 2001. "The impact of inflation on financial sector performance," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 221-248, April.
  12. Poonam Gupta & Thierry Tressel & Enrica Detragiache, 2005. "Finance in Lower Income Countries," IMF Working Papers 05/167, International Monetary Fund.
  13. Pablo Druck & Alexander Plekhanov & Mario Dehesa, 2007. "Relative Price Stability, Creditor Rights, and Financial Deepening," IMF Working Papers 07/139, International Monetary Fund.
  14. Emilio Sacerdoti, 2005. "Access to Bank Credit in Sub-Saharan Africa," IMF Working Papers 05/166, International Monetary Fund.
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Citations

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Cited by:
  1. Kpodar, Kangni & Singh, Raju Jan, 2011. "Does financial structure matter for poverty ? evidence from developing countries," Policy Research Working Paper Series 5915, The World Bank.
  2. Marc Quintyn & Geneviève Verdier, 2010. "Mother, Can I Trust the Government? Sustained Financial Deepening," IMF Working Papers 10/210, International Monetary Fund.
  3. Antonio David & Montfort Mlachila & Ashwin Moheeput, 2014. "Does Openness Matter for Financial Development in Africa?," IMF Working Papers 14/94, International Monetary Fund.
  4. Yifei Huang & Raju Jan Singh, 2011. "Financial Deepening, Property Rights and Poverty," IMF Working Papers 11/196, International Monetary Fund.
  5. Calixte Ahokpossi & Kareem Ismail & Sudipto Karmakar & Mesmin Koulet-Vickot, 2013. "Financial Depth in the WAEMU," IMF Working Papers 13/161, International Monetary Fund.
  6. Hovhannes Toroyan & George C. Anayiotos, 2009. "Institutional Factors and Financial Sector Development," IMF Working Papers 09/258, International Monetary Fund.

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