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Finance and democracy in Africa

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  • Simplice A, Asongu

Abstract

The motivations of the Arab Spring and hitherto unanswered questions about some of its dynamics inspired this paper, which focuses on how democracy, polity and autocracy affect financial development dynamics of depth, efficiency, activity and size in Africa; contingent on religious-domination, income-levels and colonial-legacies. Findings could be summarized in the following. (1) Authoritarian regimes have a higher propensity to effect policies that favor the development of financial intermediary depth, activity and size. Democracy has important effects on the degree of competition for public offices but less significant effects in comparison with autocracy on policies towards financial development. (2) Christian-dominated countries have higher (lower) levels of financial intermediation efficiency (depth) than-Islam oriented countries. (3) Income-levels also matter in financial development as poor countries have a lower propensity to improve their financial dynamics than wealthy states. (4) On average English common-law countries have better democratic institutions that their French civil-law counterparts. (5) There is evidence of a U-shape relationship between national wealth and the level of democracy, with Low-income countries experiencing lower (higher) levels of democracy than Upper (Lower) middle income countries. As a policy implication, once democracy is initiated, it should be accelerated (to edge the appeals of authoritarian regimes) and reap the benefits of level and time hypotheses in financial development.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35500.

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Date of creation: 20 Dec 2011
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Handle: RePEc:pra:mprapa:35500

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Keywords: Banking; Finance; Politics; Democracy; Development;

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References

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  1. Simplice A., Asongu, 2011. "Law, Finance and Investment: does legal origin matter?," MPRA Paper 34698, University Library of Munich, Germany.
  2. Simplice A, Asongu, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real, Monetary and Fiscal Policy Convergence Analysis," MPRA Paper 41552, University Library of Munich, Germany.
  3. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Legal Determinants of External Finance," Working Paper 19443, Harvard University OpenScholar.
  4. Paresh Narayan & Seema Narayan & Russell Smyth, 2007. "Does Democracy Facilitate Economic Growth Or Does Economic Growth Facilitate Democracy? An Empirical Study Of Sub-Saharan Africa," Development Research Unit Working Paper Series 10-07, Monash University, Department of Economics.
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  6. Simplice A. Asongu, 2012. "Law and Finance in Africa," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(4), pages 385-408.
  7. Guillaumont, Patrick & Jeanneney, Sylviane Guillaumont & Brun, Jean-Francois, 1999. "How Instability Lowers African Growth," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(1), pages 87-107, March.
  8. repec:fth:wobaco:1083 is not listed on IDEAS
  9. Simplice A. Asongu, 2013. "Fighting consumer price inflation in Africa: What do dynamics in money, credit, efficiency and size tell us?," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 5(1), pages 39-60, February.
  10. Asongu Simplice, 2011. "New financial intermediary development indicators for developing countries," Working Papers 11/005, African Governance and Development Institute..
  11. Asongu Simplice, 2011. "Law, finance, economic growth and welfare: why does legal origin matter?," Working Papers 11/007, African Governance and Development Institute..
  12. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-58, June.
  13. Asongu Simplice, 2011. "Government Quality Determinants of Stock Market Performance in African Countries," Working Papers 11/019, African Governance and Development Institute..
  14. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
  15. Simplice A. ASONGU, 2011. "Why Do French Civil–Law Countries Have Higher Levels Of Financial Efficiency?," Journal of Advanced Research in Law and Economics, ASERS Publishing, vol. 0(2), pages 94-108, December.
  16. Simplice A, Asongu, 2012. "Real and Monetary Policy Convergence: EMU Crisis to the CFA Zone," MPRA Paper 36051, University Library of Munich, Germany.
  17. Hristos Doucouliagos & Mehmet Ulubasoglu, 2006. "Democracy and Economic Growth: A Meta-Analysis," Economics Series 2006_04, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
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  24. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2002. "Law and finance : why does legal origin matter?," Policy Research Working Paper Series 2904, The World Bank.
  25. Asongu Simplice, 2012. "African Financial Development Dynamics: Big Time Convergence," Working Papers 12/003, African Governance and Development Institute..
  26. Yang, Benhua, 2011. "Does democracy foster financial development? An empirical analysis," Economics Letters, Elsevier, vol. 112(3), pages 262-265, September.
  27. Badawi, Ibrahim El & Makdisi, Samir, 2007. "Explaining the democracy deficit in the Arab world," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(5), pages 813-831, February.
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  30. Jagdish Bhagwati, 1995. "Democracy and Development: New Thinking on an Old Question," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 30(1), pages 1-18, January.
  31. Simplice A, Asongu, 2012. "On the effect of foreign aid on corruption," MPRA Paper 36545, University Library of Munich, Germany.
  32. Asongu Simplice, 2011. "Law and Investment in Africa," Working Papers 11/014, African Governance and Development Institute..
  33. Wade, Robert, 1985. "The market for public office: Why the Indian state is not better at development," World Development, Elsevier, vol. 13(4), pages 467-497, April.
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Citations

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Cited by:
  1. Simplice A, Asongu, 2012. "African Financial Development Dynamics: Big Time Convergence," MPRA Paper 36053, University Library of Munich, Germany.
  2. Asongu Simplice, 2012. "How has Mobile Banking Stimulated Financial Development in Africa?," Working Papers 12/027, African Governance and Development Institute..
  3. Asongu, Simplice A, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," MPRA Paper 44995, University Library of Munich, Germany.
  4. Asongu Simplice, 2012. "Politics and Consumer Prices in Africa," Working Papers 12/032, African Governance and Development Institute..
  5. Simplice A. Asongu, 2013. "Real and monetary policy convergence: EMU crisis to the CFA zone," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 5(1), pages 20-38, February.
  6. Simplice A, Asongu, 2012. "Linkages between investment flows and financial development: causality evidence from selected African countries," MPRA Paper 38719, University Library of Munich, Germany.
  7. Asongu Simplice, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real and Monetary Policy Convergence Analysis," Working Papers 12/005, African Governance and Development Institute..
  8. Asongu Simplice, 2012. "Are financial benefits of financial globalization questionable until greater domestic financial development has taken place?," Working Papers 12/007, African Governance and Development Institute..
  9. Simplice A, Asongu, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real, Monetary and Fiscal Policy Convergence Analysis," MPRA Paper 41552, University Library of Munich, Germany.
  10. Simplice A, Asongu, 2012. "How has Mobile Phone Penetration Stimulated Financial Development in Africa?," MPRA Paper 41198, University Library of Munich, Germany.

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