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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. Asongu Simplice, 2011. "New financial intermediary development indicators for developing countries," Working Papers 11/005, African Governance and Development Institute..
  2. Simplice A, Asongu, 2012. "Government quality determinants of stock market performance in African countries," MPRA Paper 39631, University Library of Munich, Germany.
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  8. Simplice A., Asongu, 2011. "Law and Investment in Africa," MPRA Paper 34700, University Library of Munich, Germany.
  9. Stulz, Rene M. & Williamson, Rohan, 2003. "Culture, openness, and finance," Journal of Financial Economics, Elsevier, vol. 70(3), pages 313-349, December.
  10. Asongu Simplice, 2011. "Why do French civil-law countries have higher levels of financial efficiency?," Working Papers 11/011, African Governance and Development Institute..
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  17. Simplice A, Asongu, 2012. "Real and Monetary Policy Convergence: EMU Crisis to the CFA Zone," MPRA Paper 36051, University Library of Munich, Germany.
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  23. Simplice A, Asongu, 2012. "African Financial Development Dynamics: Big Time Convergence," MPRA Paper 36053, University Library of Munich, Germany.
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  27. Simplice A., Asongu, 2011. "Law, Finance and Investment: does legal origin matter?," MPRA Paper 34698, University Library of Munich, Germany.
  28. 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.
  29. 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.
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Citations

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Cited by:
  1. Simplice A, Asongu, 2012. "How has mobile banking stimulated financial development in Africa?," MPRA Paper 38576, University Library of Munich, Germany.
  2. Simplice A Asongu, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," Economics Bulletin, AccessEcon, vol. 33(1), pages 663-676.
  3. 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.
  4. Simplice A, Asongu, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real and Monetary Policy Convergence Analysis," MPRA Paper 36056, University Library of Munich, Germany.
  5. Asongu Simplice, 2012. "African Financial Development Dynamics: Big Time Convergence," Working Papers 12/003, African Governance and Development Institute..
  6. Asongu Simplice, 2012. "Politics and Consumer Prices in Africa," Working Papers 12/032, African Governance and Development Institute..
  7. Asongu Simplice, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real, Monetary and Fiscal Policy Convergence Analysis," Working Papers 12/006, African Governance and Development Institute..
  8. Asongu Simplice, 2012. "Linkages between Investment Flows and Financial Development: Causality Evidence from Selected African Countries," Working Papers 12/029, African Governance and Development Institute..
  9. Simplice A. Asongu, 2013. "How has Mobile Phone Penetration Stimulated Financial Development in Africa?," Journal of African Business, Taylor & Francis Journals, vol. 14(1), pages 7-18, April.
  10. Asongu Simplice, 2012. "Real and Monetary Policy Convergence: EMU Crisis to the CFA Zone," Working Papers 12/033, African Governance and Development Institute..

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