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Linkages between financial development, financial instability, financial liberalisation and economic growth in Africa

Author

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  • Enowbi Batuo

    (University of Westminster, UK)

  • Kupukile Mlambo

    (African Development Bank, Tunisia)

  • Simplice A. Asongu

    (Yaoundé, Cameroon)

Abstract

In the aftermath of the 2008 global financial crisis, the implications of financial liberalisation for stability and economic growth has come under increased scrutiny. One strand of literature posits a positive relationship between financial liberalisation and economic growth and development. However, others emphasise the link between financial liberalisation is intrinsically associated with financial instability which may be harmful to economic growth and development. This study assesses linkages between financial instability, financial liberalisation, financial development and economic growth in 41 African countries for the period 1985-2010. The results suggest that financial development and financial liberalisation have positive effects on financial instability. The findings also reveal that economic growth reduces financial instability and the magnitude of reduction is higher in the pre-liberalisation period compared to post-liberalisation period.

Suggested Citation

  • Enowbi Batuo & Kupukile Mlambo & Simplice A. Asongu, 2017. "Linkages between financial development, financial instability, financial liberalisation and economic growth in Africa," Research Africa Network Working Papers 17/030, Research Africa Network (RAN).
    • Handle: RePEc:abh:wpaper:17/030
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    More about this item

    Keywords

    Economic Growth ; Financial Development; Financial instability and Africa;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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