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Interest Rate Liberalization, Quality institutions and Stock Market Development in Selected Sub-Saharan African Countries

Author

Listed:
  • Wakilat Olabisi Balogun

    (Universiti Utara Malaysia, School of Economics Finance & Banking, Malaysia)

  • Jauhari B. Dahalan

    (Universiti Utara Malaysia, School of Economics Finance & Banking, Malaysia)

  • Sallahuddin B. Hassan

    (Universiti Utara Malaysia, School of Economics Finance & Banking, Malaysia)

Abstract

The paper examines the long run effects of interest rate liberalization and institutional quality on the development of stock market in seven selected subSaharan African (SSA) countries using panel dataset that spans 1990-2013. The study employs dynamic heterogeneous panel method using the technique of pooled mean group. The results reveal that on the average liberalizing the interest rates has a negative long run impact on the development of the stock markets in the seven selected SSA economies. Institutional quality on the other hand has significant positive relationship with the development of stock market. The policy recommendation as a result of this finding is that liberalization of interest rates in the SSA region should be a guided one.

Suggested Citation

  • Wakilat Olabisi Balogun & Jauhari B. Dahalan & Sallahuddin B. Hassan, 2016. "Interest Rate Liberalization, Quality institutions and Stock Market Development in Selected Sub-Saharan African Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 786-792.
  • Handle: RePEc:eco:journ1:2016-02-56
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    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Ioannis Tokatlidis, 2003. "Financial Liberalisation: The African Experience," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(Supplemen), pages 53-88, September.
    2. Andrea Bassanini & Stefano Scarpetta, 2001. "Does Human Capital Matter for Growth in OECD Countries?: Evidence from Pooled Mean-Group Estimates," OECD Economics Department Working Papers 282, OECD Publishing.
    3. Edward F. Blackburne III & Mark W. Frank, 2007. "Estimation of nonstationary heterogeneous panels," Stata Journal, StataCorp LP, vol. 7(2), pages 197-208, June.
    4. Kamal A. El-Wassal, 2005. "Understanding the Growth in Emerging Stock Markets," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 4(3), pages 227-261, December.
    5. Arestis, Philip & Demetriades, Panicos O, 1997. "Financial Development and Economic Growth: Assessing the Evidence," Economic Journal, Royal Economic Society, vol. 107(442), pages 783-799, May.
    6. Geert Bekaert & Campbell Harvey & Christian T. Lundblad, 2003. "Equity market liberalization in emerging markets," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 53-74.
    7. Reinhart, Carmen & Calvo, Guillermo, 1999. "The Consequences and Management of Capital Inflows: Lessons for Sub-Saharan Africa," MPRA Paper 7901, University Library of Munich, Germany.
    8. Bangake, Chrysost & Eggoh, Jude C., 2012. "Pooled Mean Group estimation on international capital mobility in African countries," Research in Economics, Elsevier, vol. 66(1), pages 7-17.
    9. Philip Arestis & Asena Caner, 2004. "Financial Liberalization and Poverty: Channels of Influence," Economics Working Paper Archive wp_411, Levy Economics Institute.
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    More about this item

    Keywords

    Interest Rate; Institutional Quality; Stock Market Development;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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