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Understanding the Growth of African Financial Markets

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  • Mihasonirina Andrianaivo
  • Charles Amo Yartey
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    Abstract

    This paper examines empirically the determinants of financial market development in Africa with an emphasis on banking systems and stock markets. The results show that income level, creditor rights protection, financial repression, and political risk are the main determinants of banking sector development in Africa, and that stock market liquidity, domestic savings, banking sector development, and political risk are the main determinants of stock market development. We also find that liberalizing the capital account promotes financial market development only in countries with high incomes, well- developed institutions, or both. The powerful impacts of political risk on both banking sector and stock market development suggest that resolution of political risk may be important to the development of African financial markets.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/182.

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    Length: 40
    Date of creation: 01 Aug 2009
    Date of revision:
    Handle: RePEc:imf:imfwpa:09/182

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    Related research

    Keywords: Banks; Stock markets; Banking sector; Banking systems; Corporate sector; Economic models; Private savings; stock market; stock market development; capital account liberalization; stock market capitalization; private equity; stock market liquidity; bond; financial market; financial market development; capital markets; financial repression; reserve requirements; financial markets; financial liberalization; financial intermediaries; equity market; capital flows; international capital; international capital markets; capital market; financial institutions; bond markets; private equity funds; stock exchange; equity funds; bond market; financial economics; international country risk guide; cost of capital; equity investments; access to international capital; financial sector; capital adequacy; deposit money; private capital flows; private capital; moral hazard; financial system; capital adequacy ratio; financial systems; access to international capital markets; stock exchanges; financial intermediation; hedging; government bond market; financial assets; financial structure; hedging instruments; emerging stock market; bonds; stock returns; emerging stock markets; bond market development; inward remittances; foreign portfolio investment; credit market; cash flow; deposit money banks; interest rate ceilings; world capital markets; capital controls; public stock; securities markets; liquid markets; international standards; capital accumulation; government bond; financial sector performance; commercial bank lending; debt securities; government securities; excess liquidity; international capital market; financial intermediary development; financial dependence; credit rationing; cash flow problems; financial services; portfolio investment; hedge;

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    Cited by:
    1. Bittencourt, Manoel, 2011. "Inflation and financial development: Evidence from Brazil," Economic Modelling, Elsevier, vol. 28(1-2), pages 91-99, January.
    2. Ayadi, Rym & Arbak, Emrah & Ben-Naceur, Sami & De Groen, Willem Pieter, 2013. "Benchmarking the Financial Sector in the Southern and Eastern Mediterranean Countries and Projecting 2030 Financial Sector Scenarios," CEPS Papers 7868, Centre for European Policy Studies.
    3. Kamal A. El-Wassal, 2013. "The Development of Stock Markets: In Search of a Theory," International Journal of Economics and Financial Issues, Econjournals, vol. 3(3), pages 606-624.
    4. Hartwell , Christopher A., 2014. "The impact of institutional volatility on financial volatility in transition economies: a GARCH family approach," BOFIT Discussion Papers 6/2014, Bank of Finland, Institute for Economies in Transition.

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