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Bank efficiency and openness in Africa: do income levels matter?

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  • Simplice A, Asongu

Abstract

The business of this study is to investigate what role openness play in bank efficiency with respect to income levels. From a panel of 29 countries spelling from 1987 to 2008, we provide evidence that; trade and financial openness, breed less bank efficiency in low income countries; justifying the absence of a banking comparative advantage in said countries and therefore a likely palaver of over-liquidity. Results for middle income countries are not significant. For policy implication, it holds that; openness will increase the economic cost of banks in low income sampled countries. Bearing this in mind, trade openness will be more detrimental than financial openness.

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File URL: http://mpra.ub.uni-muenchen.de/27025/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27011.

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Date of creation: 26 Nov 2010
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Handle: RePEc:pra:mprapa:27011

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Keywords: Bank efficiency; Openness; Panel; Africa;

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References

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  1. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  2. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
  3. Staub, Roberta B. & da Silva e Souza, Geraldo & Tabak, Benjamin M., 2010. "Evolution of bank efficiency in Brazil: A DEA approach," European Journal of Operational Research, Elsevier, vol. 202(1), pages 204-213, April.
  4. Gries, Thomas & Kraft, Manfred & Meierrieks, Daniel, 2009. "Linkages Between Financial Deepening, Trade Openness, and Economic Development: Causality Evidence from Sub-Saharan Africa," World Development, Elsevier, vol. 37(12), pages 1849-1860, December.
  5. Kim, Dong-Hyeon & Lin, Shu-Chin & Suen, Yu-Bo, 2010. "Dynamic effects of trade openness on financial development," Economic Modelling, Elsevier, vol. 27(1), pages 254-261, January.
  6. Asongu Simplice, 2011. "Globalization, Financial Development and Regional Economic Dynamics: asymmetric panel evidence from Africa," Working Papers 11/008, African Governance and Development Institute..
  7. Sandrine Kablan, 2010. "Banking Efficiency and Financial Development in Sub-Saharan Africa," IMF Working Papers 10/136, International Monetary Fund.
  8. Sathye, Milind, 2003. "Efficiency of banks in a developing economy: The case of India," European Journal of Operational Research, Elsevier, vol. 148(3), pages 662-671, August.
  9. Baltagi, Badi H. & Demetriades, Panicos O. & Law, Siong Hook, 2009. "Financial development and openness: Evidence from panel data," Journal of Development Economics, Elsevier, vol. 89(2), pages 285-296, July.
  10. Simplice Anutechia, Asongu, 2010. "Linkages between Financial Development and Openness: panel evidence from developing countries," MPRA Paper 26926, University Library of Munich, Germany.
  11. Venus Khim-Sen Liew, 2004. "Which Lag Length Selection Criteria Should We Employ?," Economics Bulletin, AccessEcon, vol. 3(33), pages 1-9.
  12. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  13. Simplice A, Asongu, 2010. "Financial development, trade openness and financial openness: do income levels matter for developing countries?," MPRA Paper 27441, University Library of Munich, Germany.
  14. Beck , Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2009. "Financial institutions and markets across countries and over time - data and analysis," Policy Research Working Paper Series 4943, The World Bank.
  15. repec:ebl:ecbull:v:3:y:2004:i:33:p:1-9 is not listed on IDEAS
  16. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
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Citations

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Cited by:
  1. Asongu, Simplice A, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," MPRA Paper 44995, University Library of Munich, Germany.
  2. Asongu Simplice, 2013. "The Knowledge Economy-finance nexus in SSA and MENA countries," Working Papers 13/022, African Governance and Development Institute..
  3. Asongu Simplice, 2012. "Globalization and Africa: implications for human development," Working Papers 12/022, African Governance and Development Institute..
  4. Asongu Simplice, 2012. "How has Mobile Phone Penetration Stimulated Financial Development in Africa?," Working Papers 12/026, African Governance and Development Institute..
  5. Simplice A., Asongu, 2011. "New financial intermediary development indicators for developing countries," MPRA Paper 30921, University Library of Munich, Germany.
  6. Simplice Asongu, 2014. "The impact of health worker migration on development dynamics: evidence of wealth effects from Africa," The European Journal of Health Economics, Springer, vol. 15(2), pages 187-201, March.
  7. Asongu, Simplice, 2014. "On the substitution of institutions and finance in investment," MPRA Paper 56814, University Library of Munich, Germany.
  8. Simplice A, Asongu, 2012. "Are financial benefits of financial globalization questionable until greater domestic financial development has taken place?," MPRA Paper 37631, University Library of Munich, Germany.
  9. Simplice A, Asongu, 2012. "Financial development dynamic thresholds of financial globalization: evidence from Africa," MPRA Paper 44254, University Library of Munich, Germany.
  10. Asongu Simplice, 2013. "Liberalization and financial sector competition: a critical contribution to the empirics with an African assessment," Working Papers 13/031, African Governance and Development Institute..

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