Bank Efficiency and Openness in Africa: Do Income Levels Matter?
This paper integrates a previously missing wealth-effect component in the openness-finance debate. From a panel of 29 low and middle income African countries with data spanning from 1987 to 2008, we provide evidence that openness (trade and financial) triggers less bank efficiency in low income countries than in their middle income counterparts. These findings justify the absence of a banking comparative advantage and consequently, the issue of over-liquidity resulting from low funding of economic operators with mobilized financial deposits. In terms of policy implications, globalization increases economic cost of banks in sampled countries, with trade openness more detrimental than financial openness. Banks in middle income countries play a greater role in financing activities resulting from trade openness than those in low income countries. Also, a lot needs to be done on the improvement of infrastructures that curtails information asymmetry in the banking industry.
|Date of creation:||15 Dec 2010|
|Date of revision:||18 Dec 2011|
|Contact details of provider:|| Web page: http://www.afridev.org/index.php/en/|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
- Beck , Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2009. "Financial institutions and markets across countries and over time - data and analysis," Policy Research Working Paper Series 4943, The World Bank.
- Sandrine Kablan, 2009. "Banking Efficiency and Financial Development in Sub-Saharan Africa (SSA)," The African Finance Journal, Africagrowth Institute, vol. 11(2), pages 28-50.
- Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002.
"Unit root tests in panel data: asymptotic and finite-sample properties,"
Journal of Econometrics,
Elsevier, vol. 108(1), pages 1-24, May.
- Tom Doan, . "LEVINLIN: RATS procedure to perform Levin-Lin-Chu test for unit roots in panel data," Statistical Software Components RTS00242, Boston College Department of Economics.
- repec:ebl:ecbull:v:3:y:2004:i:33:p:1-9 is not listed on IDEAS
- Thomas Gries & Manfred Kraft & Daniel Meierrieks, 2008.
"Linkages between Financial Deepening,Trade Openness and Economic Development: Causality Evidence from Sub-Saharan Africa,"
Working Papers CIE
15, University of Paderborn, CIE Center for International Economics.
- Gries, Thomas & Kraft, Manfred & Meierrieks, Daniel, 2009. "Linkages Between Financial Deepening, Trade Openness, and Economic Development: Causality Evidence from Sub-Saharan Africa," World Development, Elsevier, vol. 37(12), pages 1849-1860, December.
- Simplice Anutechia, Asongu, 2010. "Linkages between Financial Development and Openness: panel evidence from developing countries," MPRA Paper 26926, University Library of Munich, Germany.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995.
"Testing for Unit Roots in Heterogeneous Panels,"
Cambridge Working Papers in Economics
9526, Faculty of Economics, University of Cambridge.
- Badi H. Baltagi & Panicos O. Demetriades & Siong Hook Law, 2008.
"Financial Development and Openness: Evidence from Panel Data,"
Center for Policy Research Working Papers
107, Center for Policy Research, Maxwell School, Syracuse University.
- Baltagi, Badi H. & Demetriades, Panicos O. & Law, Siong Hook, 2009. "Financial development and openness: Evidence from panel data," Journal of Development Economics, Elsevier, vol. 89(2), pages 285-296, July.
- Sathye, Milind, 2003. "Efficiency of banks in a developing economy: The case of India," European Journal of Operational Research, Elsevier, vol. 148(3), pages 662-671, August.
- Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
- Staub, Roberta B. & da Silva e Souza, Geraldo & Tabak, Benjamin M., 2010.
"Evolution of bank efficiency in Brazil: A DEA approach,"
European Journal of Operational Research,
Elsevier, vol. 202(1), pages 204-213, April.
- Roberta B. Staub & Geraldo Souza & Benjamin M. Tabak, 2009. "Evolution of Bank Efficiency in Brazil: A DEA Approach," Working Papers Series 200, Central Bank of Brazil, Research Department.
- Sandrine Kablan, 2010. "Banking Efficiency and Financial Development in Sub-Saharan Africa," IMF Working Papers 10/136, International Monetary Fund.
- Asongu Simplice, 2011. "Globalization, Financial Development and Regional Economic Dynamics: asymmetric panel evidence from Africa," Working Papers 11/008, African Governance and Development Institute..
- Simplice A, Asongu, 2010. "Financial development, trade openness and financial openness: do income levels matter for developing countries?," MPRA Paper 27441, University Library of Munich, Germany.
- Venus Khim-Sen Liew, 2004. "Which Lag Length Selection Criteria Should We Employ?," Economics Bulletin, AccessEcon, vol. 3(33), pages 1-9.
- Kim, Dong-Hyeon & Lin, Shu-Chin & Suen, Yu-Bo, 2010. "Dynamic effects of trade openness on financial development," Economic Modelling, Elsevier, vol. 27(1), pages 254-261, January.
When requesting a correction, please mention this item's handle: RePEc:agd:wpaper:10/001. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Asongu Simplice)
If references are entirely missing, you can add them using this form.