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On the substitution of institutions and finance in investment

  • Simplice A Asongu

    ()

    (African Governance and Development Institute)

The Ali (2013, EB) findings on the nexuses among institutions, finance and investment could have an important influence on policy and academic debates. This paper relaxes his hypotheses on the conception, definition and measurement of finance and institutions because they are less realistic to developing countries to which the resulting policy implications are destined. We dissect with great acuteness the contextual underpinnings of financial development dynamics and elucidate why the Acemoglu & Johnson (2005) justification provided for the measurement of property rights institutions (PRI) is lacking in substance. Using updated data (1996-2010) from 53 African countries, we provide more robust evidence on the substitution of institutions and finance in investment. Results under many baseline and augmented scenarios are not consistent with the underlying paper. Justifications for the differences in findings are discussed. As a policy implication, the Ali (2013, EB) findings for countries with poor financial systems may not be relevant for Africa.

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File URL: http://www.accessecon.com/Pubs/EB/2014/Volume34/EB-14-V34-I3-P142.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 34 (2014)
Issue (Month): 3 ()
Pages: 1557-1574

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Handle: RePEc:ebl:ecbull:eb-13-00861
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  1. Simplice A, Asongu, 2012. "Financial development dynamic thresholds of financial globalization: evidence from Africa," MPRA Paper 44254, University Library of Munich, Germany.
  2. Asongu Simplice, 2012. "How has Mobile Phone Penetration Stimulated Financial Development in Africa?," Working Papers 12/026, African Governance and Development Institute..
  3. Simplice A, Asongu, 2012. "Government quality determinants of stock market performance in African countries," MPRA Paper 39631, University Library of Munich, Germany.
  4. Asongu Simplice, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," Working Papers 13/012, African Governance and Development Institute..
  5. Simplice Asongu, 2013. "Harmonizing IPRs on Software Piracy: Empirics of Trajectories in Africa," Journal of Business Ethics, Springer, vol. 118(1), pages 45-60, November.
  6. Simplice A., Simplice, 2011. "Why do French civil-law countries have higher levels of financial efficiency?," MPRA Paper 33950, University Library of Munich, Germany.
  7. Simplice A, Asongu, 2012. "A Short-run Schumpeterian Trip to Embryonic African Monetary Zones," MPRA Paper 43190, University Library of Munich, Germany.
  8. Asongu Simplice, 2012. "Fighting consumer price inflation in Africa. What do dynamics in money, credit, efficiency and size tell us?," Working Papers 12/011, African Governance and Development Institute..
  9. Stephen Bond & Anke Hoeffler, 2001. "GMM Estimation of Empirical Growth Models," Economics Series Working Papers 2001-W21, University of Oxford, Department of Economics.
  10. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  11. Asongu Simplice, 2013. "Correcting inflation with financial dynamic fundamentals: which adjustments matter in Africa?," Working Papers 13/003, African Governance and Development Institute..
  12. Simplice A. Asongu & Gilbert A.A. Aminkeng, 2013. "The economic consequences of China--Africa relations: debunking myths in the debate," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 11(4), pages 261-277, November.
  13. Asongu, Simplice A, 2013. "Inequality, poverty and quality of institutions: which freedom channels of globalization matter for Africa?," MPRA Paper 46929, University Library of Munich, Germany.
  14. Asongu, Simplice A, 2013. "How do financial reforms affect inequality through financial sector competition? Evidence from Africa," MPRA Paper 44410, University Library of Munich, Germany.
  15. 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.
  16. Asongu Simplice & Antonio R. Andrés, 2012. "Fighting software piracy: which governance tools matter in Africa?," Working Papers 12/017, African Governance and Development Institute..
  17. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  18. Simplice A, Asongu, 2010. "Bank efficiency and openness in Africa: do income levels matter?," MPRA Paper 27011, University Library of Munich, Germany.
  19. Daron Acemoglu & Simon Johnson, 2003. "Unbundling Institutions," NBER Working Papers 9934, National Bureau of Economic Research, Inc.
  20. Federico Varese, 1997. "The Transition to the Market and Corruption in Post-socialist Russia," Political Studies, Political Studies Association, vol. 45(3), pages 579-596.
  21. Stephen Bond & Anke Hoeffler & Jonathan Temple, 2001. "GMM Estimation of Empirical Growth Models," Economics Papers 2001-W21, Economics Group, Nuffield College, University of Oxford.
  22. Enowbi Batuo, Michael & Kupukile, Mlambo, 2009. "How Can Economic and Political Liberalisation Improve Financial Development in African Countries?," MPRA Paper 20651, University Library of Munich, Germany.
  23. Augustin Kwasi Fosu, 2012. "Growth of African Economies: Productivity, Policy Syndromes and the Importance of Institutions," Economics Series Working Papers WPS/2012-11, University of Oxford, Department of Economics.
  24. Abdi Ali, 2013. "Are property rights institutions and financial development complements or substitutes? The case of private investment," Economics Bulletin, AccessEcon, vol. 33(2), pages 1126-1131.
  25. Asongu Simplice & Michael E. Batuo, 2012. "The Impact of Liberalisation Policies on Inequality in Africa," Working Papers 12/038, African Governance and Development Institute..
  26. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  27. Magnus Saxegaard, 2006. "Excess Liquidity and the Effectiveness of Monetary Policy; Evidence From Sub-Saharan Africa," IMF Working Papers 06/115, International Monetary Fund.
  28. Enowbi Batuo, Michael & Asongu, Simplice A., 2012. "The impact of liberalisation policies on income inequality in african countries," MPRA Paper 43344, University Library of Munich, Germany.
  29. Asongu Simplice, 2012. "Globalization, (fighting) corruption and development: how are these phenomena linearly and nonlinearly related in wealth effects?," Working Papers 12/024, African Governance and Development Institute..
  30. Enowbi Batuo, Michael & Guidi, Francesco & Mlambo, Kupukile, 2010. "Financial Development and Income Inequality: Evidence from African Countries," MPRA Paper 25658, University Library of Munich, Germany.
  31. Augustin Kwasi Fosu, 2013. "Institutions and African Economies: An Overview," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 491-498, August.
  32. Henry Kaiser, 1974. "An index of factorial simplicity," Psychometrika, Springer, vol. 39(1), pages 31-36, March.
  33. Lalountas, Dionisios A. & Manolas, George A. & Vavouras, Ioannis S., 2011. "Corruption, globalization and development: How are these three phenomena related?," Journal of Policy Modeling, Elsevier, vol. 33(4), pages 636-648, July.
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