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Financial Globalisation Dynamic Thresholds for Financial Development: Evidence from Africa

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  • Simplice A Asongu

    (Vrije Universiteit Brussel
    African Governance and Development Institute)

  • Lieven De Moor

    (Vrije Universiteit Brussel)

Abstract

We investigate whether financial development benefits from financial globalisation are questionable until certain thresholds of financial globalisation are attained. The empirical evidence is based on (i) data from 53 African countries for the period 2000–2011 and (ii) interactive Generalised Method of Moments with forward orthogonal deviations. The following findings are established. First, thresholds of Net Foreign Direct Investment Inflows as a percentage of GDP (FDIgdp) from which financial globalisation increases money supply are 20.50 and 16.00 for below- and above-median sub-samples of financial globalisation, respectively. Second, FDIgdp thresholds from which financial globalisation increases banking system activity and financial system activity for below-median sub-samples of financial globalisation are 13.81 and 13.29, respectively. Third, for financial size, there is evidence of: (i) a positive threshold of 21.30 in the full sample and (ii) consistent increasing returns without a modifying threshold for the above-median sub-sample. Policy implications are discussed.

Suggested Citation

  • Simplice A Asongu & Lieven De Moor, 2017. "Financial Globalisation Dynamic Thresholds for Financial Development: Evidence from Africa," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 29(1), pages 192-212, January.
  • Handle: RePEc:pal:eurjdr:v:29:y:2017:i:1:d:10.1057_ejdr.2016.10
    DOI: 10.1057/ejdr.2016.10
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    More about this item

    Keywords

    banking; international investment; financial integration; development;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F30 - International Economics - - International Finance - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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