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How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence

  • Simplice A Asongu


    (African Governance and Development Institute)

This paper investigates how financial, trade, institutional and political liberalization policies have affected financial efficiency in Africa. It uses updated data to appraise second generation reforms in order to gather fresh evidence and derive more updated policy implications. The ‘freedom to trade' and ‘economic freedom' indices are also employed. The following findings are established. (1) Financial liberalization mitigates financial allocation efficiency, with the magnitude of the de jure indicator (KAOPEN) higher than that of the de facto measurement (FDI). (2) Exports significantly improve financial efficiency. (3) Institutional liberalization has a positive effect on the efficiency of allocation while the effect of political liberalization is not significant. (4) Freedom of trade decreases (improves) financial (banking) system efficiency. (5) Economic freedom facilitates the transformation of mobilized financial resources (deposits) into credit for economic operators. Justifications for these nexuses are provided.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 33 (2013)
Issue (Month): 1 ()
Pages: 663-676

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Handle: RePEc:ebl:ecbull:eb-13-00003
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  30. Peter Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Discussion Papers 07-004, Stanford Institute for Economic Policy Research.
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  32. Asongu Simplice, 2010. "Bank Efficiency and Openness in Africa: Do Income Levels Matter?," Working Papers 10/001, African Governance and Development Institute., revised 18 Dec 2011.
  33. Menzie D. Chinn & Hiro Ito, 2002. "Capital Account Liberalization, Institutions and Financial Development: Cross Country Evidence," NBER Working Papers 8967, National Bureau of Economic Research, Inc.
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