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How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence

  • Asongu Simplice



This paper investigates how financial, trade, institutional and political liberalization policies have affected financial efficiency in Africa. It uses updated data to appraise second generation reforms in order to gather fresh evidence and derive more updated policy implications. The ‘freedom to trade’ and ‘economic freedom’ indices are also employed. The following findings are established. (1) Financial liberalization mitigates financial allocation efficiency, with the magnitude of the de jure indicator (KAOPEN) higher than that of the de facto measurement (FDI). (2) Exports significantly improve financial efficiency. (3) Institutional liberalization has a positive effect on the efficiency of allocation while the effect of political liberalization is not significant. (4) Freedom of trade decreases (improves) financial (banking) system efficiency. (5) Economic freedom facilitates the transformation of mobilized financial resources (deposits) into credit for economic operators. Justifications for these nexuses are provided.

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Paper provided by African Governance and Development Institute. in its series Working Papers with number 13/012.

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Length: 22
Date of creation: 03 Jan 2013
Date of revision:
Publication status: Published in Economics Bulletin
Handle: RePEc:agd:wpaper:13/012
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